REG - Carnival PLC - Half-year Report
27/06/2024 15:45
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RNS Number : 2175U Carnival PLC 27 June 2024
June 27, 2024
RELEASE OF CARNIVAL CORPORATION & PLC JOINT QUARTERLY REPORT ON FORM 10-Q
FOR THE SECOND QUARTER OF 2024 AND CARNIVAL PLC GROUP HALF-YEARLY FINANCIAL
REPORT
Carnival Corporation & plc announced its second quarter results of
operations in its earnings release issued on June 25, 2024. Carnival
Corporation & plc is hereby announcing that today it has filed its joint
Quarterly Report on Form 10-Q ("Form 10-Q") with the U.S. Securities and
Exchange Commission ("SEC") containing the Carnival Corporation & plc
unaudited consolidated financial statements as of and for the three and six
months ended May 31, 2024.
In addition, the Directors are today presenting in the attached Schedule A,
the unaudited interim condensed financial statements for the Carnival plc
Group ("Interim Financial Statements") as of and for the six months ended May
31, 2024. The Interim Financial Statements exclude the consolidated results of
Carnival Corporation and are prepared under UK-adopted International Financial
Reporting Standards.
Schedule B contains the Carnival Corporation & plc Form 10-Q which
includes unaudited consolidated financial statements as of and for the three
and six months ended May 31, 2024, management's discussion and analysis
("MD&A") of financial conditions and results of operations, and
information on Carnival Corporation and Carnival plc's sales and purchases of
their equity securities and use of proceeds from such sales. The information
included in the Form 10-Q (Schedule B) has been prepared in accordance with
SEC rules and regulations. The Carnival Corporation & plc unaudited
consolidated financial statements contained in the Form 10-Q have been
prepared in accordance with generally accepted accounting principles in the
United States of America ("U.S. GAAP").
The Directors consider that within the Carnival Corporation and Carnival plc
dual listed company ("DLC") arrangement, the most appropriate presentation of
Carnival plc's results and financial position is by reference to the Carnival
Corporation & plc U.S. GAAP unaudited consolidated financial statements
("DLC Financial Statements").
These schedules (A & B) are presented together as Carnival plc's Group
half-yearly financial report ("Interim Financial Report") in accordance with
the requirements of the UK Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority.
MEDIA CONTACT INVESTOR RELATIONS CONTACT
Jody Venturoni Beth Roberts
001 469 797 6380 001 305 406 4832
The Form 10-Q is available for viewing on the SEC website at www.sec.gov under
Carnival Corporation or Carnival plc or the Carnival Corporation & plc
website at www.carnivalcorp.com or www.carnivalplc.com. A copy of the Form
10-Q and the Interim Financial Statements have been submitted to the National
Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. Additional information
can be obtained via Carnival Corporation & plc's website listed above or
by writing to Carnival plc at Carnival House, 100 Harbour Parade, Southampton,
SO15 1ST, United Kingdom.
Carnival Corporation & plc is the largest global cruise company, and among
the largest leisure travel companies, with a portfolio of world-class cruise
lines - AIDA Cruises, Carnival Cruise Line, Costa Cruises, Cunard, Holland
America Line, P&O Cruises (Australia), P&O Cruises (UK), Princess
Cruises, and Seabourn.
Additional information can be found on www.carnivalcorp.com, www.aida.de,
www.carnival.com, www.costacruise.com, www.cunard.com, www.hollandamerica.com,
www.pocruises.com.au, www.pocruises.com, www.princess.com and
www.seabourn.com. For more information on Carnival Corporation's
industry-leading sustainability initiatives, visit
www.carnivalsustainability.com.
SCHEDULE A
CARNIVAL PLC
INTERIM CONDENSED GROUP STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(in millions, except per share data)
Six Months Ended May 31,
Notes 2024 2023
Revenues
Passenger ticket $3,227 $2,495
Onboard and related 1,121 896
7 4,347 3,391
Operating Expenses
Commissions, transportation and related 764 604
Onboard and related 271 213
Payroll and related 521 503
Fuel 458 446
Food 265 228
Other operating 933 863
Cruise and tour operating expenses 3,212 2,856
Selling and administrative 7 539 495
Depreciation and amortisation 7 365 367
4,116 3,718
Operating Income (Loss) 232 (327)
Nonoperating Income (Expense)
Interest income 29 6
Loss from investments in associates (5) (25)
Interest expense, net of capitalised interest (168) (178)
Other income (expense), net 29 (26)
(116) (224)
Income (Loss) Before Income Taxes 116 (550)
Income Tax Expense, Net (1) (12)
Net Income (Loss) $115 $(563)
Earnings (Loss) Per Share
Basic $0.61 $(3.02)
Diluted $0.61 $(3.02)
The accompanying notes are an integral part of these Interim Financial
Statements.
These Interim Financial Statements only present the Carnival plc consolidated
IFRS Interim Financial Statements and, accordingly, do not include the
consolidated IFRS results of Carnival Corporation.
Within the DLC arrangement the most appropriate presentation of Carnival plc's
results and financial position is considered to be by reference to the DLC
Financial Statements.
CARNIVAL PLC
INTERIM CONDENSED GROUP STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in millions)
Six Months Ended May 31,
2024 2023
Net Income (Loss) $115 $(563)
Other Comprehensive Income (Loss)
Items that will not be reclassified through the Statements of Income (Loss)
Remeasurements of post-employment benefit obligations (5) (11)
Items that may be reclassified through the Statements of Income (Loss)
Changes in foreign currency translation adjustment (5) 127
Other Comprehensive Income (Loss) (10) 116
Total Comprehensive Income (Loss) $104 $(447)
The accompanying notes are an integral part of these Interim Financial
Statements.
These Interim Financial Statements only present the Carnival plc consolidated
IFRS Interim Financial Statements and, accordingly, do not include the
consolidated IFRS results of Carnival Corporation.
Within the DLC arrangement the most appropriate presentation of Carnival plc's
results and financial position is considered to be by reference to the DLC
Financial Statements.
CARNIVAL PLC
INTERIM CONDENSED GROUP BALANCE SHEETS
(UNAUDITED)
(in millions)
Notes May 31, November 30, 2023
2024
ASSETS
Current Assets
Cash and cash equivalents $703 $1,363
Trade and other receivables, net 235 303
Inventories 193 241
Prepaid expenses and related 238 269
Total current assets 1,368 2,176
Property and Equipment, Net 3 11,148 11,480
Right-of-Use Assets, Net 556 623
Investments in Associates 80 85
Other Assets 4 210 324
$13,362 $14,689
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt 5 $1,140 $1,040
Current portion of lease liabilities 138 134
Accounts payable 362 487
Accrued liabilities and related 624 622
Customer deposits 2 2,235 2,237
Amount owed to the Carnival Corporation group 417 2,659
Total current liabilities 4,916 7,178
Long-Term Debt 5 6,926 6,043
Long-Term Lease Liabilities 452 518
Contingencies 6 102 101
Other Long-Term Liabilities 289 280
Shareholders' Equity
Share capital 361 361
Share premium 1,143 1,143
Retained earnings 1,429 1,366
Other reserves (2,255) (2,300)
Total shareholders' equity 677 569
$13,362 $14,689
The accompanying notes are an integral part of these Interim Financial
Statements.
These Interim Financial Statements only present the Carnival plc consolidated
IFRS Interim Financial Statements and, accordingly, do not include the
consolidated IFRS results of Carnival Corporation.
Within the DLC arrangement the most appropriate presentation of Carnival plc's
results and financial position is considered to be by reference to the DLC
Financial Statements.
CARNIVAL PLC
INTERIM CONDENSED GROUP STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Six Months Ended May 31,
2024 2023
Restated*
OPERATING ACTIVITIES
Income (Loss) before income taxes $116 $(550)
Adjustments to reconcile income (loss) before income taxes to net cash
provided by (used in) operating activities
Depreciation and amortisation 365 367
Share-based compensation 4 6
Interest expense, net 147 180
(Income) loss from investments in associates 5 25
Unrealized foreign currency exchange (gain) loss (45) 29
Other 25 6
617 62
Changes in operating assets and liabilities
Receivables 48 (35)
Inventories 43 23
Prepaid expenses and other assets (2) 79
Accounts payable (80) (67)
Accrued liabilities, other and contingencies (21) (30)
Customer deposits 53 257
Cash provided by (used in) operations before interest, debt issuance costs and 659 290
income taxes
Interest received 29 6
Interest paid (142) (105)
Debt issuance costs paid (53) (34)
Income tax benefit received (paid), net (6) 1
Net cash provided by (used in) operating activities 487 157
INVESTING ACTIVITIES
Purchases of property and equipment (839) (997)
Proceeds from sales of ships - 32
Other 103 -
Net cash provided by (used in) investing activities (736) (965)
FINANCING ACTIVITIES
Payments to the Carnival Corporation group, net (1,533) 1,395
Principal repayments of long-term debt (410) (1,027)
Proceeds from issuance of long-term debt 1,581 830
Lease liabilities principal payments (47) (40)
Net cash provided by (used in) financing activities (409) 1,158
Effect of exchange rate changes on cash and cash equivalents (2) (20)
Net increase (decrease) in cash and cash equivalents (660) 330
Cash and cash equivalents at beginning of period 1,363 251
Cash and cash equivalents at end of period $703 $582
*The Group statement of cash flows for the six months ended May 31, 2023 was
restated. Refer to Note 1 - "General" for further details.
The accompanying notes are an integral part of these Interim Financial
Statements.
These Interim Financial Statements only present the Carnival plc consolidated
IFRS Interim Financial Statements and, accordingly, do not include the
consolidated IFRS results of Carnival Corporation.
Within the DLC arrangement the most appropriate presentation of Carnival plc's
results and financial position is considered to be by reference to the DLC
Financial Statements.
CARNIVAL PLC
INTERIM CONDENSED GROUP STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(in millions)
Reserves
Share capital Share premium Retained earnings Translation reserve Cash flow hedges Treasury shares Other reserves Merger reserve Total Total shareholders (deficit)' equity
At November 30, 2022 $361 $143 $1,175 $(2,526) $22 $(1,734) $116 $1,503 $(2,619) $(940)
Comprehensive income (loss)
Net income (loss) - - (563) - - - - - - (563)
Changes in foreign currency translation adjustment - - - 127 - - - - 127 127
Remeasurements of post-employment benefit obligations - - (11) - - - - - - (11)
Total comprehensive income - - (574) 127 - - - - 127 (447)
Issuance of ordinary share capital - 1,000 - - - - - - - 1,000
Issuance of treasury shares for vested share-based awards - - (41) - - 41 - - 41 -
Other, net (a) - - - - - (1) 8 - 7 7
At May 31, 2023 $361 $1,143 $560 $(2,399) $22 $(1,694) $124 $1,503 $(2,444) $(380)
At November 30, 2023 $361 $1,143 $1,366 $(2,258) $21 $(1,694) $128 $1,503 $(2,300) $569
Comprehensive income (loss)
Net income (loss) - - 115 - - - - - - 115
Changes in foreign currency translation adjustment - - - (5) - - - - (5) (5)
Remeasurements of post-employment benefit obligations - - (5) - - - - - - (5)
Total comprehensive income (loss) - - 110 (5) - - - - (5) 104
Issuance of treasury shares for vested share-based awards - - (47) - - 47 - - 47 -
Other, net (a) - - - - - - 3 - 3 4
At May 31, 2024 $361 $1,143 $1,429 $(2,263) $21 $(1,647) $131 $1,503 $(2,255) $677
(a) Includes equity settled share-based payments
The accompanying notes are an integral part of these Interim Financial
Statements.
These Interim Financial Statements only present the Carnival plc consolidated
IFRS Interim Financial Statements and, accordingly, do not include the
consolidated IFRS results of Carnival Corporation.
Within the DLC arrangement the most appropriate presentation of Carnival plc's
results and financial position is considered to be by reference to the DLC
Financial Statements.
CARNIVAL PLC
NOTES TO INTERIM CONDENSED GROUP FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - General
Description of Business
Carnival plc was incorporated in England and Wales in 2000 and is domiciled in
the UK with its headquarters located at Carnival House, 100 Harbour Parade,
Southampton, Hampshire, SO15 1ST, UK (registration number 04039524). Carnival
plc and its subsidiaries and associates are referred to collectively in these
Interim Financial Statements as the "Group," "our," "us" and "we".
Carnival Corporation & plc is the largest global cruise company, and among
the largest leisure travel companies, with a portfolio of world-class cruise
lines - AIDA Cruises, Carnival Cruise Line, Costa Cruises, Cunard, Holland
America Line, P&O Cruises (Australia), P&O Cruises (UK), Princess
Cruises, and Seabourn.
DLC Arrangement
Carnival Corporation and Carnival plc operate a dual listed company ("DLC")
arrangement, whereby the businesses of Carnival Corporation and Carnival plc
are combined through a number of contracts and provisions in Carnival
Corporation's Articles of Incorporation and By-Laws and Carnival plc's
Articles of Association. The two companies operate as a single economic
enterprise with a single senior management team and identical Boards of
Directors, but each has retained its separate legal identity. Each company's
shares are publicly traded on the New York Stock Exchange ("NYSE") for
Carnival Corporation and the London Stock Exchange for Carnival plc. The
Carnival plc American Depositary Shares are traded on the NYSE.
The constitutional documents of each company provide that, on most matters,
the holders of the common equity of both companies effectively vote as a
single body. The Equalization and Governance Agreement between Carnival
Corporation and Carnival plc provides for the equalization of dividends and
liquidation distributions based on an equalization ratio and contains
provisions relating to the governance of the DLC arrangement. Because the
equalization ratio is 1 to 1, one share of Carnival Corporation common stock
and one Carnival plc ordinary share are generally entitled to the same
distributions.
Under deeds of guarantee executed in connection with the DLC arrangement, as
well as stand-alone guarantees executed since that time, each of Carnival
Corporation and Carnival plc have effectively cross guaranteed all
indebtedness and certain other monetary obligations of each other. Once the
written demand is made, the holders of indebtedness or other obligations may
immediately commence an action against the relevant guarantor.
Under the terms of the DLC arrangement, Carnival Corporation and Carnival plc
are permitted to transfer assets between the companies, make loans to or
investments in each other and otherwise enter into intercompany transactions.
In addition, the cash flows and assets of one company are required to be used
to pay the obligations of the other company, if necessary.
The Boards of Directors consider that, within the DLC arrangement, the most
appropriate presentation of Carnival plc's results and financial position is
by reference to the U.S. generally accepted accounting principles ("U.S.
GAAP") DLC Financial Statements because all significant financial and
operating decisions affecting the DLC companies are made on a joint basis to
optimize the consolidated performance as a single economic entity.
Accordingly, the DLC Financial Statements for the three and six months ended
May 31, 2024 are provided to shareholders as supplementary information, which
are included in Schedule B, but do not form part of these Carnival plc interim
financial statements.
Going Concern
The assessment of liquidity, financial conditions and capital resources within
Schedule B indicates that Carnival
Corporation & plc has sufficient liquidity to meet its commitments and
obligations for at least 12 months from the date of
the report. In light of these circumstances, the Board of Directors of the
Group have a reasonable expectation that
Carnival Corporation & plc has adequate resources to continue its
operational existence and continue to adopt the
going concern basis of preparing the Carnival plc Interim Financial
Statements.
Basis of Preparation
The Carnival plc Interim financial statements are presented in U.S. dollars
unless otherwise noted and are prepared on the historical cost basis. These
Interim Financial Statements are required to satisfy reporting requirements of
the United Kingdom's Financial Conduct Authority ("FCA") and do not include
the consolidated results and financial position of Carnival Corporation and
its subsidiaries. These Interim Financial Statements have been prepared in
accordance with the Disclosure Guidance and Transparency Rules of the FCA and
with International Accounting Standard 34 "Interim Financial Reporting" as
adopted by the UK ("IAS 34"). The Interim Financial Statements should be read
in conjunction with the audited annual financial statements for the year ended
November 30, 2023, which were prepared in accordance with UK-adopted
International Financial Reporting Standards ("IFRS").
Prior Period Cash Flow Restatement
The Group statement of cash flows for the six months ended May 31, 2023 was
restated to correct the presentation of:
• Unrealized foreign currency exchange gains as an adjustment to
reconcile income (loss) before income taxes to net cash provided by (used in)
operating activities.
• Debt issuance costs, which are now presented within operating
activities and were previously presented as financing activities.
May 31, 2023
(in millions) As previously stated Unrealized foreign currency exchange Debt issuance costs Restated
Operating Activities
Unrealized foreign currency exchange (gain) loss $- $29 $- $29
Receivables $(29) $(6) $- $(35)
Accrued liabilities, and other contingencies $(29) $(1) $- $(30)
Customer deposits $251 $6 $- $257
Debt issuance costs paid $- $- $(34) $(34)
Net cash provided by (used in) operating activities $164 $28 $(34) $157
Financing Activities
Payments to the Carnival Corporation group, net $1,406 $(11) $- $1,395
Debt issuance costs $(34) $- $34 $-
Net cash provided by (used in) financing activities $1,135 $(11) $34 $1,158
Effect of exchange rate changes on cash and cash equivalents $(4) $(16) $- $(20)
Status of Financial Statements
Our Interim Financial Statements for the six months ended May 31, 2024 have
not been audited or reviewed by the auditors.
Our Interim Financial Statements do not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006 Act. Statutory accounts for
the year ended November 30, 2023 were approved by the Boards of Directors on
January 26, 2024 and delivered to the Registrar of Companies. The report of
the auditors on those accounts was (i) unqualified, (ii) did not contain a
material uncertainty related to going concern and (iii) did not contain any
statement under section 498 of the 2006 Act.
Use of Estimates and Risks and Uncertainty
The preparation of our Interim Financial Statements in conformity with IFRS as
adopted in the UK requires management to make judgements, estimates and
assumptions that affect the application of policies and reported and disclosed
amounts in these financial statements. The estimates and underlying
assumptions are based on historical experience and various other factors that
we believe to be reasonable under the circumstances and form the basis of
making judgments about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from the
estimates used in preparing these Interim Financial Statements.
Significant accounting estimates, assumptions and judgements are reviewed on
an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision
affects both current and future periods. For a detailed discussion of our
significant accounting estimates, assumptions and judgements refer to Note 2 -
Significant Accounting Policies included in our 2023 Carnival plc Annual
Report.
Accounting Pronouncements
The International Accounting Standards Board ("IASB") has issued amendments to
the standard, IAS 1, Presentation of Financial Statements - Classification of
Liabilities as Current or Non-current, providing a more general approach to
the classification of liabilities based on the contractual agreements in place
at the reporting date. These amendments are required to be adopted by us for
the financial year commencing on December 1, 2024 and must be applied
retrospectively. We do not expect the adoption of this guidance to have a
material impact on our consolidated financial statements.
The IASB has issued amendments to the standards, IAS 7, Statement of Cash
Flows and IFRS 7, Financial Instruments: Disclosures titled Supplier Finance
Arrangements. These amendments require that an entity disclose information
about its supplier finance arrangements that enables users of financial
statements to assess the effects of those arrangements on the entity's
liabilities and cash flows and the entity's exposure to liquidity risk. These
amendments are required to be adopted by us for the financial year commencing
on December 1, 2024. We are currently evaluating the impact of these
amendments on the disclosures to our consolidated financial statements.
NOTE 2 - Revenue and Expense Recognition
Guest cruise deposits and advance onboard purchases are initially included in
customer deposits when received. Customer deposits are subsequently recognized
as cruise revenues, together with revenues from onboard and other activities,
and all associated direct costs and expenses of a voyage are recognized as
cruise costs and expenses, upon completion of voyages with durations of ten
nights or less and on a pro rata basis for voyages in excess of ten nights.
The impact of recognizing these shorter duration cruise revenues and costs and
expenses on a completed voyage basis versus on a pro rata basis is not
material. Certain of our product offerings are bundled and we allocate the
value of the bundled services and goods between passenger ticket revenues and
onboard and related revenues based upon the estimated standalone selling
prices of those goods and services. Guest cancellation fees, when applicable,
are recognized in passenger ticket revenues at the time of cancellation.
Our sales to guests of air and other transportation to and from airports near
the home ports of our ships are included in passenger ticket revenues, and the
related costs of purchasing these services are included in transportation
costs. The proceeds that we collect from the sales of third-party shore
excursions are included in onboard and related revenues and the related costs
are included in onboard and related costs. The amounts collected on behalf of
our onboard concessionaires, net of the amounts remitted to them, are included
in onboard and related revenues as concession revenues. All of these amounts
are recognized on a completed voyage or pro rata basis as discussed above.
Revenues and expenses from our hotel and transportation operations, which are
included in our Tour and Other segment, are recognized at the time the
services are performed.
Customer Deposits
Our payment terms generally require an initial deposit to confirm a
reservation, with the balance due prior to the voyage. Cash received from
guests in advance of the cruise is recorded in customer deposits and in other
long-term liabilities on our Consolidated Balance Sheets. These amounts
include refundable deposits. We had total customer deposits of $2.4 billion as
of May 31, 2024 and November 30, 2023. During the six months ended May 31,
2024 and 2023, we recognized revenues of $1.8 billion and $1.3 billion
related to our customer deposits as of November 30, 2023 and 2022. Our
customer deposits balance changes due to the seasonal nature of cash
collections, which typically results from higher ticket prices and occupancy
levels during the third quarter, the recognition of revenue, refunds of
customer deposits and foreign currency changes.
Trade and Other Receivables
Although we generally require full payment from our customers prior to or
concurrently with their cruise, we grant credit terms to a relatively small
portion of our revenue source. We have receivables from credit card merchants
and travel agents for cruise ticket purchases and onboard revenue. These
receivables are included within trade and other receivables, net and are less
allowances for expected credit losses.
We have agreements with a number of credit card processors that transact
customer deposits related to our cruise vacations. Certain of these agreements
allow the credit card processors to request, under certain circumstances, that
we provide a capped reserve fund in cash.
Contract Costs
We recognize incremental travel agent commissions and credit and debit card
fees incurred as a result of obtaining the ticket contract as assets when paid
prior to the start of a voyage. We record these amounts within prepaid
expenses and related and subsequently recognize these amounts as commissions,
transportation and related at the time of revenue recognition or at the time
of voyage cancellation. We had incremental costs of obtaining contracts with
customers recognized as assets of $71 million and $75 million as of May 31,
2024 and November 30, 2023.
NOTE 3 - Property and Equipment
(in millions)
At November 30, 2023 $11,480
Additions 796
Disposals (701)
Depreciation (292)
Exchange movements (134)
At May 31, 2024 $11,148
We review our long-lived assets for impairment whenever events or
circumstances indicate potential impairment. During the six months ended May
31, 2024, we did not identify any triggers indicating possible impairment and
therefore, did not record any impairments.
Refer to Note 1 - "General, Use of Estimates and Risks and Uncertainty" for
additional discussion and refer to Note 8 - "Related Party Transactions" for
details on ship sales to Carnival Corporation group.
NOTE 4 - Other Assets
(in millions) May 31, 2024 November 30, 2023
Long-term deposits $1 $108
VAT receivables 74 68
Debt issuance costs (a) - 35
Post-employment benefits 5 11
Other long-term assets and other receivables 130 103
$210 $324
(a) Debt issuance costs are for undrawn facilities.
NOTE 5 - Debt and Interest Expense
Export Credit Facility Borrowings
During the six months ended May 31, 2024, we borrowed $1.6 billion under
export credit facilities due in semi-annual installments through 2036. As of
May 31, 2024, the net book value of the Carnival plc vessels subject to
negative pledges was $4.1 billion.
Revolving Facilities
Carnival Corporation & plc had $3.0 billion available for borrowing under
its Revolving Facility as of May 31, 2024. Carnival Corporation & plc may
continue to borrow or otherwise utilize available amounts under the Revolving
Facility through August 2024, subject to satisfaction of the conditions in the
facility.
Carnival Holdings II, a subsidiary of Carnival Corporation, has a
$2.5 billion New Revolving Facility which may be utilized from August 2024
through August 2027, replacing our Revolving Facility upon its maturity in
August 2024. The New Revolving Facility was extended from 2025 to 2027 and
contains an accordion feature, which Carnival Holdings II partially exercised
in 2024 to increase commitments from $2.1 billion to $2.5 billion. The
accordion feature allows for further additional commitments not to exceed the
aggregate commitments under our Revolving Facility.
Covenant Compliance
As of May 31, 2024, Carnival Corporation & plc's Revolving Facility, New
Revolving Facility, unsecured loans and export credit facilities contain
certain covenants listed below:
• Maintain minimum interest coverage (adjusted EBITDA to
consolidated net interest charges, as defined in the agreements) (the
"Interest Coverage Covenant") as follows:
◦ For certain unsecured loans and the New Revolving Facility, from
the end of each fiscal quarter from August 31, 2024, at a ratio of not less
than 2.0 to 1.0 for each testing date occurring from August 31, 2024 until May
31, 2025, at a ratio of not less than 2.5 to 1.0 for the August 31, 2025 and
November 30, 2025 testing dates, and at a ratio of not less than 3.0 to 1.0
for the February 28, 2026 testing date onwards and as applicable through their
respective maturity dates.
◦ For the export credit facilities, from the end of each fiscal
quarter from May 31, 2024, at a ratio of not less than 2.0 to 1.0 for each
testing date occurring from May 31, 2024 until May 31, 2025, at a ratio of not
less than 2.5 to 1.0 for the August 31, 2025 and November 30, 2025 testing
dates, and at a ratio of not less than 3.0 to 1.0 for the February 28, 2026
testing date onwards.
• For certain unsecured loans and export credit facilities,
maintain minimum issued capital and consolidated reserves (as defined in the
agreements) of $5.0 billion.
• Limit its debt to capital (as defined in the agreements)
percentage to a percentage not to exceed 65%.
• Maintain minimum liquidity of $1.5 billion.
• Adhere to certain restrictive covenants through August 2027
(subject to such covenants terminating if the Company reaches an investment
grade credit rating in accordance with the agreement governing the New
Revolving Facility).
• Limit the amounts of our secured assets as well as secured and
other indebtedness.
At May 31, 2024, Carnival Corporation & plc was in compliance with the
applicable covenants under its debt agreements. Generally, if an event of
default under any debt agreement occurs, then, pursuant to cross-default
and/or cross-acceleration clauses therein, substantially all of its
outstanding debt and derivative contract payables could become due, and its
debt and derivative contracts could be terminated. Any financial covenant
amendment may lead to increased costs, increased interest rates, additional
restrictive covenants and other available lender protections that would be
applicable.
NOTE 6 - Contingencies
Provisions
The Group's contingencies include estimated liabilities for crew, guest and
other third-party claims. The liabilities associated with crew illnesses and
crew and guest injury claims, including all legal costs, are estimated based
on the specific merits of the individual claims or actuarially estimated based
on historical claims experience, loss development factors and other
assumptions.
The changes in our contingencies were as follows:
(in millions) Claims Reserves
November 30, 2023 $137
Additional provisions 21
Paid losses (12)
Reversals (11)
Exchange movements (1)
May 31, 2024 $134
(in millions) May 31, 2024 November 30, 2023
Provisions
Current $32 $36
Non-current 102 101
$134 $137
Litigation
We are routinely involved in legal proceedings, claims, disputes, regulatory
matters and governmental inspections or investigations arising in the ordinary
course of or incidental to our business. We have insurance coverage for
certain of these claims and actions, or any settlement of these claims and
actions, and historically the maximum amount of our liability, net of any
insurance recoverables, has been limited to our self-insurance retention
levels.
We record provisions in the financial statements for pending litigation when
we determine that an unfavorable outcome is probable and the amount of the
loss can be reasonably estimated.
Legal proceedings and government investigations are subject to inherent
uncertainties, and unfavorable rulings or other events could occur.
Unfavorable resolutions could involve substantial monetary damages. In
addition, in matters for which conduct remedies are sought, unfavorable
resolutions could include an injunction or other order prohibiting us from
selling one or more products at all or in particular ways, precluding
particular business practices or requiring other remedies. An unfavorable
outcome might result in a material adverse impact on our business, results of
operations, financial position or liquidity.
As of May 31, 2024, two purported class actions brought against us by former
guests in the Federal Court in Australia and in Italy remain pending, as
previously disclosed. These actions include claims based on a variety of
theories, including negligence, gross negligence and failure to warn, physical
injuries and severe emotional distress associated with being exposed to and/or
contracting COVID-19 onboard our ships. On October 24, 2023, the court in the
Australian matter held that we were liable for negligence and for breach of
consumer protection warranties as it relates to the lead plaintiff. The court
ruled that the lead plaintiff was not entitled to any pain and suffering or
emotional distress damages on the negligence claim and awarded medical costs.
In relation to the consumer protection warranties claim, the court found that
distress and disappointment damages amounted to no more than the refund
already provided to guests and therefore made no further award. Further
proceedings will determine the applicability of this ruling to the remaining
class participants. We continue to take actions to defend against the above
claims. We believe the ultimate outcome of these matters will not have a
material impact on our consolidated financial statements.
Regulatory or Governmental Inquiries and Investigations
We have been, and may continue to be, impacted by breaches in data security
and lapses in data privacy, which occur from time to time. These can vary in
scope and range from inadvertent events to malicious motivated attacks.
We have incurred legal and other costs in connection with cyber incidents that
have impacted us. The penalties and settlements paid in connection with cyber
incidents over recent years were not material. While these incidents did not
have a material adverse effect on our business, results of operations,
financial position or liquidity, no assurances can be given about the future
and we may be subject to future attacks, incidents or litigation that could
have such a material adverse effect.
On March 14, 2022, the U.S. Department of Justice and the U.S. Environmental
Protection Agency notified Carnival Corporation & plc of potential civil
penalties and injunctive relief for alleged Clean Water Act violations by
owned and operated vessels covered by the 2013 Vessel General Permit. Carnival
Corporation & plc is working with these agencies to reach a resolution of
this matter. Carnival Corporation & plc believes the ultimate outcome will
not have a material impact on its consolidated financial statements.
On June 20, 2022, Princess Cruise Lines, Ltd., a subsidiary of Carnival
Corporation, notified the Australian Maritime Safety Authorization ("AMSA")
and the flag state, Bermuda, regarding approximately six cubic meters of
comminuted food waste (liquid biodigester effluent) inadvertently discharged
by Coral Princess inside the Great Barrier Reef Marine Park. On June 23, 2022,
the UK P&I Club N.V. provided a letter of undertaking for approximately
$1.9 million (being the estimated maximum combined penalty). On May 31, 2023,
we received a summons from the Australia Federal Prosecution Service
indicating that formal charges are being pursued against Princess Cruise
Lines, Ltd. and the Captain of the vessel. We believe the ultimate outcome
will not have a material impact on our consolidated financial statements.
On February 5, 2024, P&O Cruises (Australia) notified AMSA and the UK
Marine Accident Investigation Branch that a small amount of oil may have
inadvertently contaminated grey water which was discharged by Pacific
Adventure in the Great Barrier Reef Marine Park, Queensland. We are conducting
an internal investigation and intend to cooperate with any inquiries from
governmental authorities. We believe the ultimate outcome will not have a
material impact on our consolidated financial statements.
Other Contingent Obligations
Some of the debt contracts we enter into include indemnification provisions
obligating us to make payments to the counterparty if certain events occur.
These contingencies generally relate to changes in taxes or changes in laws
which increase the lender's costs. There are no stated or notional amounts
included in the indemnification clauses, and we are not able to estimate the
maximum potential amount of future payments, if any, under these
indemnification clauses.
NOTE 7 - Segment Information
As previously discussed, within the DLC arrangement the most appropriate
presentation of Carnival plc's results and financial position is by reference
to the DLC Financial Statements. The chief operating decision maker ("CODM"),
who is the President, Chief Executive Officer and Chief Climate Officer of
Carnival Corporation and Carnival plc assesses performance and makes decisions
to allocate resources for Carnival Corporation & plc based upon review of
the results across all of the segments. The operating segments within each of
our reportable segments have been aggregated based on the similarity of their
economic and other characteristics, including geographic guest sourcing.
Carnival Corporation & plc has four reportable segments comprised of
(1) North America and Australia cruise operations ("NAA"), (2) Europe cruise
operations ("Europe"), (3) Cruise Support and (4) Tour and Other.
The Cruise Support segment includes Carnival Corporation & plc's portfolio
of leading port destinations and exclusive islands as well as other services,
all of which are operated for the benefit of its cruise brands. The Tour and
Other segment represents the hotel and transportation operations of Holland
America Princess Alaska Tours and other operations.
Six Months Ended May 31,
(in millions) Revenues Operating costs and Selling and Depreciation Operating
expenses administrative and income
amortisation (loss)
2024
NAA $7,558 $4,982 $966 $813 $797
Europe 3,466 2,386 464 328 288
Cruise Support 122 75 162 94 (210)
Tour and Other 41 59 10 12 (40)
Carnival Corporation & plc 11,187 7,502 1,603 1,247 836
- U.S. GAAP
Carnival Corporation - U.S. GAAP (a) (6,840) (4,203) (1,059) (917) (661)
Carnival plc - U.S. GAAP vs IFRS differences (b) - (87) (5) 36 57
Carnival plc - IFRS $4,347 $3,212 $539 $365 $232
2023
NAA $6,434 $4,471 $875 $738 $351
Europe 2,759 2,179 436 338 (193)
Cruise Support 106 55 124 90 (162)
Tour and Other 44 64 14 13 (47)
Carnival Corporation & plc 9,343 6,768 1,448 1,179 (52)
- U.S. GAAP
Carnival Corporation - U.S. GAAP (a) (5,952) (3,849) (948) (823) (332)
Carnival plc - U.S. GAAP vs IFRS differences (b) - (63) (5) 11 57
Carnival plc - IFRS $3,391 $2,856 $495 $367 $(327)
(a) Carnival Corporation consists primarily of cruise brands that do not form
part of the Group; however, these brands are included in Carnival Corporation
& plc and thus represent substantially all of the reconciling items.
(b) The U.S. GAAP vs IFRS accounting differences primarily relate to
differences in the carrying value of ships, lease accounting, pension
accounting and differences in depreciation expense due to differences in the
carrying value of ships.
Revenue by geographic areas, which are based on where our guests are sourced,
were as follows:
Six Months Ended,
(in millions) May 31, 2024 May 31, 2023
Europe $2,915 $2,358
North America 284 167
Australia 672 542
Other 477 324
$4,347 $3,391
NOTE 8 - Related Party Transactions
During the six months ended May 31, 2024, we sold one ship to Carnival
Corporation, which represented a passenger-capacity reduction of 4,240 berths,
for $699 million. During the six months ended May 31, 2023, we sold two ships
to Carnival Holdings (Bermuda) Limited, a subsidiary of Carnival Corporation,
for $1.5 billion. These two ships were leased back to Carnival plc.
Additionally in 2023, we completed the sale of one ship to Carnival
Corporation, which represents a passenger-capacity reduction of 4,200 berths
for $678 million. The sales price for these transactions equaled book value.
The amounts owed from the Carnival Corporation group in connection with these
non-cash transactions reduced the payable owed by Carnival plc to the Carnival
Corporation group.
During 2024, the Group had lease-related expenses of $78 million (nil in
2023), in respect of ships leased from Carnival Corporation and its
subsidiaries.
During the six months ended May 31, 2024 and 2023, Holland America Line and
Princess Cruises purchased land tours from us totaling $19 million and
$15 million. In addition, during the six months ended May 31, 2024 and 2023
we sold pre- and post-cruise vacations, shore excursions and transportation
services to the Carnival Corporation group.
During 2024, the Group had ship charter and management agreements with
Princess Cruises and Carnival Cruise Line for ships operating in Australia and
Asia. The total charter and management expenses, relating to these agreements
were $293 million and $243 million for the six months ended May 31, 2024 and
2023 and are included in other operating expenses.
During the six months ended May 31, 2024, Carnival plc continued to provide a
guarantee to the Merchant Navy Officers Pension Fund for certain employees who
have transferred from Carnival plc to a subsidiary of Carnival Corporation.
Carnival Corporation and its subsidiary, Carnival Investments Limited owned
42.9 million, or 19.7% at May 31, 2024 and November 30, 2023 of Carnival plc's
ordinary shares, which are non-voting while they are owned by Carnival
Corporation and its subsidiary.
Carnival Corporation & plc has a program that allows it to realize a net
cash benefit when Carnival Corporation common stock is trading at a premium to
the price of Carnival plc ordinary shares (the "Stock Swap Program"). Under
the Stock Swap Program, Carnival Corporation & plc may elect to offer and
sell shares of Carnival Corporation common stock at prevailing market prices
in ordinary brokers' transactions and repurchase an equivalent number of
Carnival plc ordinary shares in the UK market.
Within the DLC arrangement, there are instances where the Group provides
services to Carnival Corporation and also where Carnival Corporation provides
services to the Group.
NOTE 9 - Seasonality
Our passenger ticket revenues are seasonal. Demand for cruises has been
greatest during our third quarter, which includes the Northern Hemisphere
summer months. This higher demand during the third quarter results in higher
ticket prices and occupancy levels and, accordingly, the largest share of our
operating income is typically earned during this period. Our results are also
impacted by ships being taken out-of-service for planned maintenance, which we
schedule during non-peak seasons. In addition, substantially all of Holland
America Princess Alaska Tours' revenue and operating income is generated from
May through September in conjunction with Alaska's cruise season.
NOTE 10 - Fair Value Measurements and Derivative Instruments, Hedging
Activities and Financial Risks
Fair Value Measurements
Fair value is defined as the amount that would be received for selling an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date and is measured using inputs in one of
the following three categories:
• Level 1 measurements are based on unadjusted quoted prices in
active markets for identical assets or liabilities that we have the ability to
access. Valuation of these items does not entail a significant amount of
judgment.
• Level 2 measurements are based on quoted prices for similar
assets or liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active or market data
other than quoted prices that are observable for the assets or liabilities.
• Level 3 measurements are based on unobservable data that are
supported by little or no market activity and are significant to the fair
value of the assets or liabilities.
Considerable judgment may be required in interpreting market data used to
develop the estimates of fair value. Accordingly, certain estimates of fair
value presented herein are not necessarily indicative of the amounts that
could be realized in a current or future market exchange.
Under deeds of guarantee executed in connection with the DLC arrangement, as
well as stand-alone guarantees
executed since that time, each of Carnival Corporation and Carnival plc have
effectively cross guaranteed all
indebtedness and certain other monetary obligations of each other. The fair
value of cross guarantees within the DLC arrangement were not significant at
May 31, 2024 or November 30, 2023, and are not expected to result in any
material loss.
Financial Instruments that are not Measured at Fair Value
May 31, 2024 November 30, 2023
Carrying Value Fair Value Carrying Value Fair Value
(in millions)
Liabilities
Fixed rate debt (a) $5,813 $4,905 $4,497 $3,406
Floating rate debt (a) 2,632 2,476 2,899 2,541
Total 8,444 7,381 7,396 5,947
Less: unamortized debt issuance costs and discounts (385) (322)
Plus: debt modification loss 6 8
Total Debt $8,066 $7,082
(a) The debt amounts above do not include the impact of
interest rate swaps. The fair values of our publicly-traded notes were based
on their unadjusted quoted market prices. The fair values of our other debt
were estimated based on current market interest rates being applied to this
debt.
NOTE 11 - Subsequent Events
In June 2024, Carnival Corporation & plc announced that it will fold the
operations of P&O Cruises Australia into Carnival Cruise Line, a brand of
Carnival Corporation, in March 2025.
NOTE 12 - Principal Risks and Uncertainties
The principal risks and uncertainties affecting our business activities are
included in Item 4. Risk Management and/or Mitigation of Principal and
Emerging Risks within our 2023 Annual Report. There have been no changes to
our identified principal or emerging risks since the issuance of our 2023
Annual Report. Our principal risks and uncertainties are summarized below. The
ordering and lettering of our risks is not intended to reflect any Company
indication of priority or likelihood.
Operational Risk Factors
a. Events and conditions around the world, including geopolitical
uncertainty, war and other military actions, inflation, higher fuel prices,
higher interest rates and other general concerns impacting the ability or
desire of people to travel have led, and may in the future lead, to a decline
in demand for cruises as well as negative impacts to our operating costs and
profitability.
b. Pandemics have in the past and may in the future have a significant
negative impact on our financial condition and operations.
c. Incidents concerning our ships, guests or the cruise industry have
in the past and may, in the future, negatively impact the satisfaction of our
guests and crew and lead to reputational damage.
d. Changes in and non-compliance with laws and regulations under which
we operate, such as those relating to health, environment, safety and
security, data privacy and protection, anti-money laundering, anti-corruption,
economic sanctions, trade protection, labor and employment, and tax may be
costly and have in the past and may, in the future, lead to litigation,
enforcement actions, fines, penalties and reputational damage.
e. Factors associated with climate change, including evolving and
increasing regulations, increasing global concern about climate change and the
shift in climate conscious consumerism and stakeholder scrutiny, and
increasing frequency and/or severity of adverse weather conditions could
adversely affect our business.
f. Inability to meet or achieve our targets, goals, aspirations,
initiatives, and our public statements and disclosures regarding them,
including those that are related to sustainability matters, may expose us to
risks that may adversely impact our business.
g. Breaches in data security and lapses in data privacy as well as
disruptions and other damages to our principal offices, information technology
operations and system networks and failure to keep pace with developments in
technology may adversely impact our business operations, the satisfaction of
our guests and crew and may lead to reputational damage.
h. The loss of key team members, our inability to recruit or retain
qualified shoreside and shipboard team members and increased labor costs could
have an adverse effect on our business and results of operations.
i. Increases in fuel prices, changes in the types of fuel consumed
and availability of fuel supply may adversely impact our scheduled itineraries
and costs.
j. We rely on supply chain vendors who are integral to the operations of
our businesses. These vendors and service providers may be unable to deliver
on their commitments, which could negatively impact our business.
k. Fluctuations in foreign currency exchange rates may adversely
impact our financial results.
l. Overcapacity and competition in the cruise and land-based
vacation industry may negatively impact our cruise sales, pricing and
destination options.
m. Inability to implement our shipbuilding programs and ship repairs,
maintenance and refurbishments may adversely impact our business operations
and the satisfaction of our guests.
Financial Risk Factors
a. We require a significant amount of cash to service our debt and
sustain our operations. Our ability to generate cash depends on many factors,
including those beyond our control, and we may not be able to generate cash
required to service our debt and sustain our operations.
b. Our substantial debt could adversely affect our financial health
and operating flexibility.
NOTE 13 - Responsibility Statement
The Directors confirm that to the best of their knowledge the Interim
Financial Statements included as Schedule A to this release have been prepared
in accordance with IAS 34 as adopted by the UK, and that the half-yearly
financial report includes a fair review of the information required by DTR
4.2.7R and DTR 4.2.8R of the Disclosure Guidance and Transparency Rules of the
FCA.
The Directors of Carnival plc are listed in the Carnival plc Annual Report for
the year ended November 30, 2023, with the exception of the following change
in the period: Nelda J. Connors was appointed on April 5, 2024. Besides the
aforementioned, no new Directors have been appointed during the six months
ended May 31, 2024. A list of current Directors is maintained and is available
for inspection on the Group's website at www.carnivalplc.com
(http://www.carnivalplc.com/) .
By order of the Board
/s/ Micky Arison /s/ Josh Weinstein
Micky Arison Josh Weinstein
Chair of the Board of Directors President, Chief Executive Officer, Chief Climate Officer and Director
June 27, 2024 June 27, 2024
SCHEDULE B
Item 1. Financial Statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(in millions, except per share data)
Three Months Ended May 31, Six Months Ended
May 31,
2024 2023 2024 2023
Revenues
Passenger ticket $3,754 $3,141 $7,370 $6,011
Onboard and other 2,027 1,770 3,817 3,332
5,781 4,911 11,187 9,343
Operating Expenses
Commissions, transportation and other 732 619 1,552 1,274
Onboard and other 628 549 1,178 1,033
Payroll and related 614 601 1,237 1,183
Fuel 525 489 1,030 1,024
Food 360 325 706 636
Other operating 938 875 1,800 1,619
Cruise and tour operating expenses 3,798 3,457 7,502 6,768
Selling and administrative 789 736 1,603 1,448
Depreciation and amortization 634 597 1,247 1,179
5,221 4,791 10,352 9,394
Operating Income (Loss) 560 120 836 (52)
Nonoperating Income (Expense)
Interest income 25 69 58 124
Interest expense, net of capitalized interest (450) (542) (921) (1,082)
Debt extinguishment and modification costs (33) (31) (66) (31)
Other income (expense), net (7) (17) (25) (47)
(464) (522) (953) (1,036)
Income (Loss) Before Income Taxes 96 (402) (118) (1,087)
Income Tax Benefit (Expense), Net (5) (5) (5) (13)
Net Income (Loss) $92 $(407) $(123) $(1,100)
Earnings Per Share
Basic $0.07 $(0.32) $(0.10) $(0.87)
Diluted $0.07 $(0.32) $(0.10) $(0.87)
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in millions)
Three Months Ended May 31, Six Months Ended
May 31,
2024 2023 2024 2023
Net Income (Loss) $92 $(407) $(123) $(1,100)
Items Included in Other Comprehensive Income (Loss)
Change in foreign currency translation adjustment 7 102 7 99
Other 11 (33) 12 (19)
Other Comprehensive Income (Loss) 18 69 19 79
Total Comprehensive Income (Loss) $110 $(338) $(104) $(1,021)
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
May 31, November 30, 2023
2024
ASSETS
Current Assets
Cash and cash equivalents $1,646 $2,415
Trade and other receivables, net 494 556
Inventories 509 528
Prepaid expenses and other 1,118 1,767
Total current assets 3,768 5,266
Property and Equipment, Net 42,105 40,116
Operating Lease Right-of-Use Assets, Net 1,282 1,265
Goodwill 579 579
Other Intangibles 1,167 1,169
Other Assets 702 725
$49,603 $49,120
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $2,181 $2,089
Current portion of operating lease liabilities 144 149
Accounts payable 1,063 1,168
Accrued liabilities and other 2,114 2,003
Customer deposits 7,883 6,072
Total current liabilities 13,385 11,481
Long-Term Debt 27,154 28,483
Long-Term Operating Lease Liabilities 1,174 1,170
Other Long-Term Liabilities 1,075 1,105
Contingencies and Commitments
Shareholders' Equity
Carnival Corporation common stock, $0.01 par value; 1,960 shares authorized; 13 12
1,253 shares issued at 2024 and 1,250 shares issued at 2023
Carnival plc ordinary shares, $1.66 par value; 217 shares issued at 2024 and 361 361
2023
Additional paid-in capital 16,701 16,712
Retained earnings 62 185
Accumulated other comprehensive income (loss) ("AOCI") (1,919) (1,939)
Treasury stock, 130 shares at 2024 and 2023 of Carnival Corporation and 73 (8,404) (8,449)
shares at 2024 and 2023 of Carnival plc, at cost
Total shareholders' equity 6,814 6,882
$49,603 $49,120
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Six Months Ended May 31,
2024 2023
OPERATING ACTIVITIES
Net income (loss) $(123) $(1,100)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities
Depreciation and amortization 1,247 1,179
(Gain) loss on debt extinguishment 63 31
(Income) loss from equity-method investments 7 27
Share-based compensation 30 31
Amortization of discounts and debt issue costs 72 85
Noncash lease expense 67 72
Other 55 (9)
1,417 316
Changes in operating assets and liabilities
Receivables 38 (55)
Inventories 14 (6)
Prepaid expenses and other assets 449 (805)
Accounts payable (52) (23)
Accrued liabilities and other (30) 69
Customer deposits 1,971 2,029
Net cash provided by (used in) operating activities 3,807 1,525
INVESTING ACTIVITIES
Purchases of property and equipment (3,457) (1,772)
Proceeds from sales of ships - 255
Other 72 8
Net cash provided by (used in) investing activities (3,384) (1,509)
FINANCING ACTIVITIES
Repayments of short-term borrowings - (200)
Principal repayments of long-term debt (4,072) (2,294)
Debt issuance costs (117) (94)
Debt extinguishment costs (41) -
Proceeds from issuance of long-term debt 3,048 1,016
Proceeds from issuance of common stock - 5
Proceeds from issuance of common stock under the Stock Swap Program - 22
Purchase of treasury stock under the Stock Swap Program - (20)
Other (1) 13
Net cash provided by (used in) financing activities (1,183) (1,552)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (6) 6
Net increase (decrease) in cash, cash equivalents and restricted cash (767) (1,530)
Cash, cash equivalents and restricted cash at beginning of period 2,436 6,037
Cash, cash equivalents and restricted cash at end of period $1,669 $4,507
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(in millions)
Three Months Ended
Common Ordinary Additional Retained AOCI Treasury Total shareholders' equity
stock shares paid-in earnings stock
capital (accumulated deficit)
At February 29, 2024 $13 $361 $16,679 $(29) $(1,938) $(8,404) $6,682
Net income (loss) - - - 92 - - 92
Other comprehensive income (loss) - - - - 18 - 18
Share-based compensation and other - - 22 - - - 22
At May 31, 2024 $13 $361 $16,701 $62 $(1,919) $(8,404) $6,814
At February 28, 2023 $12 $361 $16,635 $(434) $(1,972) $(8,433) $6,170
Net income (loss) - - - (407) - - (407)
Other comprehensive income (loss) - - - - 69 - 69
Issuances of common stock, net - - 5 - - - 5
Conversion of Convertible Notes - - 3 - - - 3
Purchases and issuances under the Stock Swap program, net - - 22 - - (20) 2
Issuance of treasury shares for vested share-based awards - - (5) - - 5 -
Share-based compensation and other - - 24 - - (1) 23
At May 31, 2023 $12 $361 $16,684 $(841) $(1,903) $(8,449) $5,865
Six Months Ended
Common Ordinary Additional Retained AOCI Treasury Total shareholders' equity
stock shares paid-in earnings stock
capital (accumulated deficit)
At November 30, 2023 $12 $361 $16,712 $185 $(1,939) $(8,449) $6,882
Net income (loss) - - - (123) - - (123)
Other comprehensive income (loss) - - - - 19 - 19
Issuance of treasury shares for vested share-based awards - - (47) - - 47 -
Share-based compensation and other - - 36 - - (2) 35
At May 31, 2024 $13 $361 $16,701 $62 $(1,919) $(8,404) $6,814
At November 30, 2022 $12 $361 $16,872 $269 $(1,982) $(8,468) $7,065
Change in accounting principle (a) - - (229) (10) - - (239)
Net income (loss) - - - (1,100) - - (1,100)
Other comprehensive income (loss) - - - - 79 - 79
Issuances of common stock, net - - 5 - - - 5
Conversion of Convertible Notes - - 3 - - - 3
Purchases and issuances under the Stock Swap program, net - - 22 - - (20) 2
Issuance of treasury shares for vested share-based awards - - (41) - - 41 -
Share-based compensation and other - - 52 - - (2) 50
At May 31, 2023 $12 $361 $16,684 $(841) $(1,903) $(8,449) $5,865
(a) We adopted the provisions of Debt - Debt with Conversion and Other
Options and Derivative and Hedging - Contracts in Entity's Own Equity on
December 1, 2022.
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION & PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - General
The consolidated financial statements include the accounts of Carnival
Corporation and Carnival plc and their respective subsidiaries. Together with
their consolidated subsidiaries, they are referred to collectively in these
consolidated financial statements and elsewhere in this joint Quarterly Report
on Form 10-Q as "Carnival Corporation & plc," "our," "us" and "we."
Basis of Presentation
The accompanying consolidated financial statements are unaudited and, in the
opinion of our management, contain all adjustments, consisting of only normal
recurring adjustments, necessary for a fair statement. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America ("GAAP") have been condensed or omitted as permitted by such
Securities and Exchange Commission rules and regulations. The preparation of
our interim consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
and disclosed. We have made reasonable estimates and judgments of such items
within our financial statements and there may be changes to those estimates in
future periods. Our operations are seasonal and results for interim periods
are not necessarily indicative of the results for the entire year.
Our interim consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and the related notes
included in the Carnival Corporation & plc 2023 joint Annual Report on
Form 10-K ("Form 10-K") filed with the U.S. Securities and Exchange Commission
("SEC") on January 26, 2024.
For 2023, we reclassified $11 million from restricted cash to prepaid
expenses and other in the Consolidated Balance Sheets and $94 million from
other financing activities to debt issuance costs in the Consolidated
Statements of Cash Flows to conform to the current year presentation.
Accounting Pronouncements
In September 2022, the Financial Accounting Standards Board ("FASB") issued
guidance, Liabilities-Supplier Finance Programs - Disclosure of Supplier
Finance Program Obligations. This guidance requires that a buyer in a supplier
finance program disclose sufficient information about the program to allow a
user of financial statements to understand the program's nature, activity
during the period, changes from period to period, and potential magnitude. On
December 1, 2023, we adopted this guidance using the retrospective method for
each period presented. The adoption of this guidance had no impact on our
consolidated financial statements and disclosures.
In November 2023, the FASB issued guidance, Improvements to Reportable Segment
Disclosures. This guidance requires annual and interim disclosure of
significant segment expenses that are provided to the chief operating decision
maker ("CODM") as well as interim disclosures for all reportable segments'
profit or loss and assets. This guidance also requires disclosure of the title
and position of the CODM and an explanation of how the CODM uses the reported
measures of segment profit or loss in assessing segment performance and
deciding how to allocate resources. This guidance is required to be adopted by
us in 2025. We are currently evaluating the impact this guidance will have on
our consolidated financial statements and disclosures.
In December 2023, the FASB issued guidance, Improvements to Income Tax
Disclosures. This guidance requires disaggregation of rate reconciliation
categories and income taxes paid by jurisdiction, as well as other amendments
relating to income tax disclosures. This guidance is required to be adopted by
us in 2026. We are currently evaluating the impact this guidance will have on
our consolidated financial statements and disclosures.
Regulatory Updates
We became subject to the EU Emissions Trading Scheme ("ETS") on January 1,
2024, which includes a three-year phase-in period. The ETS regulates emissions
through a "cap and trade" principle, where a cap is set on the total amount of
certain emissions that can be emitted and requires us to procure emission
allowances for certain emissions inside EU waters (as defined in the ETS). We
record emission allowances at cost within prepaid expenses and other or other
assets, based on the timing of when they are required to be surrendered. We
record expense for emissions inside EU waters within fuel expense in the
period incurred. As of May 31, 2024, the cost of allowances purchased was
$49 million. For the three and six months ended May 31, 2024, expense for ETS
emissions were not material.
NOTE 2 - Revenue and Expense Recognition
Guest cruise deposits and advance onboard purchases are initially included in
customer deposits when received. Customer deposits are subsequently recognized
as cruise revenues, together with revenues from onboard and other activities,
and all associated direct costs and expenses of a voyage are recognized as
cruise costs and expenses, upon completion of voyages with durations of ten
nights or less and on a pro rata basis for voyages in excess of ten nights.
The impact of recognizing these shorter duration cruise revenues and costs and
expenses on a completed voyage basis versus on a pro rata basis is not
material. Certain of our product offerings are bundled and we allocate the
value of the bundled services and goods between passenger ticket revenues and
onboard and other revenues based upon the estimated standalone selling prices
of those goods and services. Guest cancellation fees, when applicable, are
recognized in passenger ticket revenues at the time of cancellation.
Our sales to guests of air and other transportation to and from airports near
the home ports of our ships are included in passenger ticket revenues, and the
related costs of these services are included in prepaid expenses and other
when paid prior to the start of a voyage and are subsequently recognized in
transportation costs at the time of revenue recognition. The cost of prepaid
air and other transportation costs at May 31, 2024 and November 30, 2023 were
$282 million and $253 million. The proceeds that we collect from the sales
of third-party shore excursions are included in onboard and other revenues and
the related costs are included in onboard and other costs. The amounts
collected on behalf of our onboard concessionaires, net of the amounts
remitted to them, are included in onboard and other revenues as concession
revenues. All of these amounts are recognized on a completed voyage or pro
rata basis as discussed above.
Passenger ticket revenues include fees, taxes and charges collected by us from
our guests. The fees, taxes and charges that vary with guest head counts are
expensed in commissions, transportation and other costs when the corresponding
revenues are recognized. The remaining portion of fees, taxes and charges are
generally expensed in other operating expenses when the corresponding revenues
are recognized.
Revenues and expenses from our hotel and transportation operations, which are
included in our Tour and Other segment, are recognized at the time the
services are performed.
Customer Deposits
Our payment terms generally require an initial deposit to confirm a
reservation, with the balance due prior to the voyage. Cash received from
guests in advance of the cruise is recorded in customer deposits and in other
long-term liabilities on our Consolidated Balance Sheets. These amounts
include refundable deposits. In certain situations, we have provided
flexibility to guests by allowing guests to rebook at a future date, receive
future cruise credits ("FCCs") or elect to receive refunds in cash. We record
a liability for FCCs to the extent we have received and not refunded cash from
guests for cancelled bookings. We had total customer deposits of $8.3 billion
as of May 31, 2024 and $6.4 billion as of November 30, 2023, which includes
approximately $60 million of unredeemed FCCs as of May 31, 2024, of which
approximately $36 million are refundable. At November 30, 2023, we had
approximately $134 million of unredeemed FCCs, of which $111 million were
refundable. During the six months ended May 31, 2024 and 2023, we recognized
revenues of $4.7 billion and $3.6 billion related to our customer deposits as
of November 30, 2023 and 2022. Our customer deposits balance changes due to
the seasonal nature of cash collections, which typically results from higher
ticket prices and occupancy levels during the third quarter, the recognition
of revenue, refunds of customer deposits and foreign currency changes.
Trade and Other Receivables
Although we generally require full payment from our customers prior to or
concurrently with their cruise, we grant credit terms to a relatively small
portion of our revenue source. We have receivables from credit card merchants
and travel agents for cruise ticket purchases and onboard revenue. These
receivables are included within trade and other receivables, net and are less
allowances for expected credit losses.
Contract Costs
We recognize incremental travel agent commissions and credit and debit card
fees incurred as a result of obtaining the ticket contract as assets when paid
prior to the start of a voyage. We record these amounts within prepaid
expenses and other and subsequently recognize these amounts as commissions,
transportation and other at the time of revenue recognition or at the time of
voyage cancellation. We had incremental costs of obtaining contracts with
customers recognized as assets of $434 million as of May 31, 2024 and
$294 million as of November 30, 2023.
NOTE 3 - Debt
May 31, November 30,
(in millions) Maturity Rate (a) (b) 2024 2023
Secured Subsidiary Guaranteed
Notes
Notes Jun 2027 7.9% $192 $192
Notes (c) Aug 2027 9.9% - 623
Notes Aug 2028 4.0% 2,406 2,406
Notes Aug 2029 7.0% 500 500
Loans
EUR floating rate (c) Jun 2025 EURIBOR + 3.8% - 851
Floating rate Aug 2027 - Oct 2028 SOFR + 2.8% (d) 2,749 3,567
Total Secured Subsidiary Guaranteed 5,847 8,138
Senior Priority Subsidiary Guaranteed
Notes May 2028 10.4% 2,030 2,030
Unsecured Subsidiary Guaranteed
Notes
Convertible Notes Oct 2024 5.8% 426 426
Notes Mar 2026 7.6% 1,351 1,351
EUR Notes (c) Mar 2026 7.6% - 550
Notes (c) Mar 2027 5.8% 2,725 3,100
Convertible Notes Dec 2027 5.8% 1,131 1,131
Notes May 2029 6.0% 2,000 2,000
EUR Notes Jan 2030 5.8% 540 -
Notes Jun 2030 10.5% 1,000 1,000
Loans
EUR floating rate (e) Apr 2025 - Mar 2026 EURIBOR + 2.4 - 3.3% 576 678
Export Credit Facilities
Floating rate Dec 2031 SOFR + 1.2% (f) 549 583
Fixed rate Aug 2027 - Dec 2032 2.4 - 3.4% 2,563 2,756
EUR floating rate Mar 2025 - Nov 2034 EURIBOR + 0.2 - 0.8% 2,835 3,086
EUR fixed rate Feb 2031 - Jul 2037 1.1 - 4.0% 5,734 3,652
Total Unsecured Subsidiary Guaranteed 21,429 20,312
Unsecured Notes (No Subsidiary Guarantee)
Notes Jan 2028 6.7% 200 200
EUR Notes Oct 2029 1.0% 648 659
Total Unsecured Notes (No Subsidiary Guarantee) 848 859
Total Debt 30,154 31,339
Less: unamortized debt issuance costs and discounts (820) (768)
Total Debt, net of unamortized debt issuance costs and discounts 29,334 30,572
Less: current portion of long-term debt (2,181) (2,089)
Long-Term Debt $27,154 $28,483
(a) The reference rates, together with any applicable credit adjustment
spread, for substantially all of our variable debt have 0.0% to 0.75% floors.
(b) The above debt table excludes the impact of any outstanding derivative
contracts.
(c) See "Debt Prepayments" below.
(d) As part of the repricing of our senior secured term loans, we amended
the loans' margin from 3.0% - 3.4% (inclusive of credit adjustment spread) to
2.8%. See "Repricing of senior secured term loans" below.
(e) The maturity of the principal amount of $216 million was extended from
April 2024 to April 2025.
(f) Includes applicable credit adjustment spread.
Carnival Corporation and/or Carnival plc is the primary obligor of all our
outstanding debt excluding the following:
• $2.0 billion of senior priority notes (the "2028 Senior
Priority Notes"), issued by Carnival Holdings (Bermuda) Limited ("Carnival
Holdings"), a subsidiary of Carnival Corporation
• $0.4 billion under a term loan facility of Costa Crociere
S.p.A. ("Costa"), a subsidiary of Carnival plc
• $0.9 billion under an export credit facility of Sun Princess
Limited, a subsidiary of Carnival Corporation
• $0.1 billion under an export credit facility of Sun Princess II
Limited, a subsidiary of Carnival Corporation
In addition, Carnival Holdings (Bermuda) II Limited ("Carnival Holdings II")
will be the primary obligor under a $2.5 billion multi-currency revolving
facility ("New Revolving Facility") when the New Revolving Facility replaces
our Revolving Facility upon its maturity in August 2024. See "Revolving
Facilities."
All of our outstanding debt is issued or guaranteed by substantially the same
entities with the exception of the following:
• Up to $250 million of the Costa term loan facility, which is
guaranteed by certain subsidiaries of Carnival plc and Costa that do not
guarantee our other outstanding debt
• Our 2028 Senior Priority Notes, issued by Carnival Holdings,
which does not guarantee our other outstanding debt
• The export credit facilities of Sun Princess Limited and Sun
Princess II Limited, which do not guarantee our other outstanding debt
As of May 31, 2024, the scheduled maturities of our debt are as follows:
(in millions)
Year Principal Payments
Remainder of 2024 $1,195
2025 1,744
2026 2,790
2027 5,212
2028 8,741
Thereafter 10,472
Total $30,154
Revolving Facilities
We had $3.0 billion available for borrowing under our Revolving Facility as of
May 31, 2024. We may continue to borrow or otherwise utilize available amounts
under the Revolving Facility through August 2024, subject to satisfaction of
the conditions in the facility.
Carnival Holdings II has a $2.5 billion New Revolving Facility which may be
utilized from August 2024 through August 2027, replacing our Revolving
Facility upon its maturity in August 2024. The New Revolving Facility was
extended from 2025 to 2027 and contains an accordion feature, which Carnival
Holdings II partially exercised in 2024 to increase commitments from
$2.1 billion to $2.5 billion. The accordion feature allows for further
additional commitments not to exceed the aggregate commitments under our
Revolving Facility.
Repricing of Senior Secured Term Loans
In April 2024, we entered into amendments with the lender syndicate to reprice
$1.7 billion of our first-priority senior secured term loan facility maturing
in 2028 and $1.0 billion of our senior secured term loan facility maturing in
2027, which are included within the total Secured Subsidiary Guaranteed Loans
balance in the debt table above.
2030 Senior Unsecured Notes
In April 2024, we issued $535 million aggregate principal amount of 5.8%
senior unsecured notes due 2030. We used the net proceeds from the issuance,
together with cash on hand, to redeem the outstanding principal amount of the
7.6% senior unsecured notes due 2026.
Debt Prepayments
During the six months ended May 31, 2024, we made prepayments for the
following debt instruments:
• Euro-denominated tranche of our first-priority senior secured
term loan facility maturing in 2025
• First-priority senior secured term loan facilities maturing in
2027 and 2028
• 9.9% second-priority secured notes due 2027
• 7.6% senior unsecured notes due 2026
• 5.8% senior unsecured notes due 2027
The aggregate amount of these prepayments was $3.2 billion.
Export Credit Facility Borrowings
During the six months ended May 31, 2024, we borrowed $2.3 billion under
export credit facilities due in semi-annual installments through 2036. As of
May 31, 2024, the net book value of the vessels subject to negative pledges
was $18.8 billion.
Collateral and Priority Pool
As of May 31, 2024, the net book value of our ships and ship improvements,
excluding ships under construction, is $40.0 billion. Our secured debt is
secured on a first-priority basis by certain collateral, which includes
vessels and certain assets related to those vessels and material intellectual
property (combined net book value of approximately $22.8 billion, including
$21.1 billion related to vessels and certain assets related to those vessels)
as of May 31, 2024 and certain other assets.
As of May 31, 2024, $8.1 billion in net book value of our ships and ship
improvements relate to the priority pool vessels included in the priority pool
of 12 unencumbered vessels (the "Senior Priority Notes Subject Vessels") for
our 2028 Senior Priority Notes and $2.9 billion in net book value of our ship
and ship improvements relate to the priority pool vessels included in the
priority pool of three unencumbered vessels (the "New Revolving Facility
Subject Vessels") for our New Revolving Facility. As of May 31, 2024, there
was no change in the identity of the Senior Priority Notes Subject Vessels or
the New Revolving Facility Subject Vessels.
Covenant Compliance
As of May 31, 2024, our Revolving Facility, New Revolving Facility, unsecured
loans and export credit facilities contain certain covenants listed below:
• Maintain minimum interest coverage (adjusted EBITDA to
consolidated net interest charges, as defined in the agreements) (the
"Interest Coverage Covenant") as follows:
o For certain of our unsecured loans and our New Revolving Facility, from
the end of each fiscal quarter from August 31, 2024, at a ratio of not less
than 2.0 to 1.0 for each testing date occurring from August 31, 2024 until May
31, 2025, at a ratio of not less than 2.5 to 1.0 for the August 31, 2025 and
November 30, 2025 testing dates, and at a ratio of not less than 3.0 to 1.0
for the February 28, 2026 testing date onwards and as applicable through their
respective maturity dates.
o For our export credit facilities, from the end of each fiscal quarter from
May 31, 2024, at a ratio of not less than 2.0 to 1.0 for each testing date
occurring from May 31, 2024 until May 31, 2025, at a ratio of not less than
2.5 to 1.0 for the August 31, 2025 and November 30, 2025 testing dates, and at
a ratio of not less than 3.0 to 1.0 for the February 28, 2026 testing date
onwards.
• For certain of our unsecured loans and export credit facilities,
maintain minimum issued capital and consolidated reserves (as defined in the
agreements) of $5.0 billion.
• Limit our debt to capital (as defined in the agreements)
percentage to a percentage not to exceed 65%.
• Maintain minimum liquidity of $1.5 billion.
• Adhere to certain restrictive covenants through August 2027
(subject to such covenants terminating if the Company reaches an investment
grade credit rating in accordance with the agreement governing the New
Revolving Facility).
• Limit the amounts of our secured assets as well as secured and
other indebtedness.
At May 31, 2024, we were in compliance with the applicable covenants under our
debt agreements. Generally, if an event of default under any debt agreement
occurs, then, pursuant to cross-default and/or cross-acceleration clauses
therein, substantially all of our outstanding debt and derivative contract
payables could become due, and our debt and derivative contracts could be
terminated. Any financial covenant amendment may lead to increased costs,
increased interest rates, additional restrictive covenants and other available
lender protections that would be applicable.
NOTE 4 - Contingencies and Commitments
Litigation
We are routinely involved in legal proceedings, claims, disputes, regulatory
matters and governmental inspections or investigations arising in the ordinary
course of or incidental to our business. We have insurance coverage for
certain of these claims and actions, or any settlement of these claims and
actions, and historically the maximum amount of our liability, net of any
insurance recoverables, has been limited to our self-insurance retention
levels.
We record provisions in the consolidated financial statements for pending
litigation when we determine that an unfavorable outcome is probable and the
amount of the loss can be reasonably estimated.
Legal proceedings and government investigations are subject to inherent
uncertainties, and unfavorable rulings or other events could occur.
Unfavorable resolutions could involve substantial monetary damages. In
addition, in matters for which conduct remedies are sought, unfavorable
resolutions could include an injunction or other order prohibiting us from
selling one or more products at all or in particular ways, precluding
particular business practices or requiring other remedies. An unfavorable
outcome might result in a material adverse impact on our business, results of
operations, financial position or liquidity.
As previously disclosed, on May 2, 2019, the Havana Docks Corporation filed a
lawsuit against Carnival Corporation in the U.S. District Court for the
Southern District of Florida under Title III of the Cuban Liberty and
Democratic Solidarity Act, also known as the Helms-Burton Act, alleging that
Carnival Corporation "trafficked" in confiscated Cuban property when certain
ships docked at certain ports in Cuba, and that this alleged "trafficking"
entitles the plaintiffs to treble damages. On March 21, 2022, the court
granted summary judgment in favor of Havana Docks Corporation as to liability.
On December 30, 2022, the court entered judgment against Carnival Corporation
in the amount of $110 million plus $4 million in fees and costs. We have
filed an appeal. Oral argument was held on May 17, 2024.
As of May 31, 2024, two purported class actions brought against us by former
guests in the Federal Court in Australia and in Italy remain pending, as
previously disclosed. These actions include claims based on a variety of
theories, including negligence, gross negligence and failure to warn, physical
injuries and severe emotional distress associated with being exposed to and/or
contracting COVID-19 onboard our ships. On October 24, 2023, the court in the
Australian matter held that we were liable for negligence and for breach of
consumer protection warranties as it relates to the lead plaintiff. The court
ruled that the lead plaintiff was not entitled to any pain and suffering or
emotional distress damages on the negligence claim and awarded medical costs.
In relation to the consumer protection warranties claim, the court found that
distress and disappointment damages amounted to no more than the refund
already provided to guests and therefore made no further award. Further
proceedings will determine the applicability of this ruling to the remaining
class participants. We continue to take actions to defend against the above
claims. We believe the ultimate outcome of these matters will not have a
material impact on our consolidated financial statements.
Regulatory or Governmental Inquiries and Investigations
We have been, and may continue to be, impacted by breaches in data security
and lapses in data privacy, which occur from time to time. These can vary in
scope and range from inadvertent events to malicious motivated attacks.
We have incurred legal and other costs in connection with cyber incidents that
have impacted us. The penalties and settlements paid in connection with cyber
incidents over recent years were not material. While these incidents did not
have a material adverse effect on our business, results of operations,
financial position or liquidity, no assurances can be given about the future
and we may be subject to future attacks, incidents or litigation that could
have such a material adverse effect.
On March 14, 2022, the U.S. Department of Justice and the U.S. Environmental
Protection Agency notified us of potential civil penalties and injunctive
relief for alleged Clean Water Act violations by owned and operated vessels
covered by the 2013 Vessel General Permit. We are working with these agencies
to reach a resolution of this matter. We believe the ultimate outcome will not
have a material impact on our consolidated financial statements.
Other Contingent Obligations
Some of the debt contracts we enter into include indemnification provisions
obligating us to make payments to the counterparty if certain events occur.
These contingencies generally relate to changes in taxes or changes in laws
which increase the lender's costs. There are no stated or notional amounts
included in the indemnification clauses, and we are not able to estimate the
maximum potential amount of future payments, if any, under these
indemnification clauses.
We have agreements with a number of credit card processors that transact
customer deposits related to our cruise vacations. Certain of these agreements
allow the credit card processors to request, under certain circumstances, that
we provide a capped reserve fund in cash. Although the agreements vary, these
requirements may generally be satisfied either through a withheld percentage
of customer payments or providing cash funds directly to the credit card
processor.
As of May 31, 2024 and November 30, 2023, we had $25 million and
$844 million in reserve funds. Additionally, as of May 31, 2024 and November
30, 2023, we had $51 million and $158 million in compensating deposits we
are required to maintain. These balances are included within other assets as
of May 31, 2024.
Ship Commitments
As of May 31, 2024, our new ship growth capital commitments were $0.1 billion
for the remainder of 2024 and $0.9 billion, $0.3 billion, $1.2 billion and
$1.0 billion for the years ending November 30, 2025, 2026, 2027 and 2028.
NOTE 5 - Fair Value Measurements, Derivative Instruments and Hedging
Activities and Financial Risks
Fair Value Measurements
Fair value is defined as the amount that would be received for selling an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date and is measured using inputs in one of
the following three categories:
• Level 1 measurements are based on unadjusted quoted prices in
active markets for identical assets or liabilities that we have the ability to
access. Valuation of these items does not entail a significant amount of
judgment.
• Level 2 measurements are based on quoted prices for similar
assets or liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active or market data
other than quoted prices that are observable for the assets or liabilities.
• Level 3 measurements are based on unobservable data that are
supported by little or no market activity and are significant to the fair
value of the assets or liabilities.
Considerable judgment may be required in interpreting market data used to
develop the estimates of fair value. Accordingly, certain estimates of fair
value presented herein are not necessarily indicative of the amounts that
could be realized in a current or future market exchange.
Financial Instruments that are not Measured at Fair Value on a Recurring
Basis
May 31, 2024 November 30, 2023
Carrying Fair Value Carrying Fair Value
Value Value
(in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Liabilities
Fixed rate debt (a) $23,445 $- $22,919 $- $22,575 $- $21,503 $-
Floating rate debt (a) 6,709 - 6,516 - 8,764 - 8,225 -
Total $30,154 $- $29,435 $- $31,339 $- $29,728 $-
(a) The debt amounts above do not include the impact of
interest rate swaps or debt issuance costs and discounts. The fair values of
our publicly-traded notes were based on their unadjusted quoted market prices
in markets that are not sufficiently active to be Level 1 and, accordingly,
are considered Level 2. The fair values of our other debt were estimated based
on current market interest rates being applied to this debt.
Financial Instruments that are Measured at Fair Value on a Recurring Basis
May 31, 2024 November 30, 2023
(in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets
Cash equivalents (a) $769 $- $- $1,021 $- $-
Derivative financial instruments - 24 - - 22 -
Total $769 $24 $- $1,021 $22 $-
Liabilities
Derivative financial instruments $- $- $- $- $28 $-
Total $- $- $- $- $28 $-
(a) Consists of money market funds and cash investments with
original maturities of less than 90 days.
Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring
Basis
Valuation of Goodwill and Trademarks
As of May 31, 2024 and November 30, 2023, goodwill for our North America and
Australia ("NAA") segment was $579 million.
Trademarks
(in millions) NAA Europe Total
Segment Segment
November 30, 2023 $927 $237 $1,164
Exchange movements - (1) (1)
May 31, 2024 $927 $236 $1,163
Derivative Instruments and Hedging Activities
(in millions) Balance Sheet Location May 31, 2024 November 30, 2023
Derivative assets
Derivatives designated as hedging instruments
Interest rate swaps (a) Prepaid expenses and other $19 $-
Other assets 4 22
Derivatives not designated as hedging instruments
Interest rate swaps (a) Prepaid expenses and other - 1
Total derivative assets $24 $22
Derivative liabilities
Derivatives designated as hedging instruments
Cross currency swaps (b) Other long-term liabilities $- $12
Interest rate swaps (a) Other long-term liabilities - 16
Total derivative liabilities $- $28
(a) We have interest rate swaps whereby we receive floating
interest rate payments in exchange for making fixed interest rate payments.
These interest rate swap agreements effectively changed $22 million at May
31, 2024 and $46 million at November 30, 2023 of EURIBOR-based floating rate
euro debt to fixed rate euro debt, and $2.0 billion at May 31, 2024 of
SOFR-based variable rate debt to fixed rate debt. As of May 31, 2024 and
November 30, 2023, the EURIBOR-based interest rate swaps settle through 2025
and were not designated as cash flow hedges; the SOFR-based interest rate
swaps settle through 2027 and were designated as cash flow hedges.
(b) At November 30, 2023, we had a cross currency swap with a
notional amount of $670 million that was designated as a hedge of our net
investment in foreign operations with euro-denominated functional currencies.
This cross currency swap was terminated in January 2024.
Our derivative contracts include rights of offset with our counterparties. As
of May 31, 2024 and November 30, 2023, there was no netting for our derivative
assets and liabilities. The amounts that were not offset in the balance sheet
were not material.
The effect of our derivatives qualifying and designated as hedging instruments
recognized in other comprehensive income (loss) and in net income (loss) was
as follows:
Three Months Ended Six Months Ended
May 31, May 31,
(in millions) 2024 2023 2024 2023
Gains (losses) recognized in AOCI:
Cross currency swaps - net investment hedges - included component $- $(5) $- $9
Cross currency swaps - net investment hedges - excluded component $- $- $- $(4)
Interest rate swaps - cash flow hedges $20 $(33) $33 $(19)
(Gains) losses reclassified from AOCI - cash flow hedges:
Interest rate swaps - Interest expense, net of capitalized interest $(8) $(9) $(20) $(10)
Foreign currency zero cost collars - Depreciation and amortization $- $- $1 $(1)
Gains (losses) recognized on derivative instruments (amount excluded from
effectiveness testing - net investment hedges)
Cross currency swaps - Interest expense, net of capitalized interest $- $3 $2 $4
The amount of gains and losses on derivatives not designated as hedging
instruments recognized in earnings during the three and six months ended May
31, 2024 and estimated cash flow hedges' unrealized gains and losses that are
expected to be reclassified to earnings in the next twelve months are not
material.
Financial Risks
Fuel Price Risks
We manage our exposure to fuel price risk by managing our consumption of fuel.
Substantially all of our exposure to market risk for changes in fuel prices
relates to the consumption of fuel on our ships. We manage fuel consumption
through fleet optimization, energy efficiency, itinerary efficiency and new
technologies and alternative fuels.
Foreign Currency Exchange Rate Risks
Overall Strategy
We manage our exposure to fluctuations in foreign currency exchange rates
through our normal operating and financing activities, including netting
certain exposures to take advantage of any natural offsets and, when
considered appropriate, through the use of derivative and non-derivative
financial instruments. Our primary focus is to monitor our exposure to, and
manage, the economic foreign currency exchange risks faced by our operations
and realized if we exchange one currency for another. We consider hedging
certain of our ship commitments and net investments in foreign operations. The
financial impacts of our hedging instruments generally offset the changes in
the underlying exposures being hedged.
Operational Currency Risks
Our operations primarily utilize the U.S. dollar, Euro, Sterling or the
Australian dollar as their functional currencies. Our operations also have
revenue and expenses denominated in non-functional currencies. Movements in
foreign currency exchange rates affect our financial statements.
Investment Currency Risks
We consider our investments in foreign operations to be denominated in stable
currencies and of a long-term nature. We have euro-denominated debt which
provides an economic offset for our operations with euro functional currency.
In addition, we have in the past and may in the future utilize derivative
financial instruments, such as cross currency swaps, to manage our exposure to
investment currency risks.
Newbuild Currency Risks
Our shipbuilding contracts are typically denominated in euros. Our decision to
hedge a non-functional currency ship commitment for our cruise brands is made
on a case-by-case basis, considering the amount and duration of the exposure,
market volatility, economic trends, our overall expected net cash flows by
currency and other offsetting risks.
At May 31, 2024, our remaining newbuild currency exchange rate risk relates to
euro-denominated newbuild contract payments for non-euro functional currency
brands, which represent a total unhedged commitment of $2.1 billion for
newbuilds scheduled to be delivered through 2027.
The cost of shipbuilding orders that we may place in the future that are
denominated in a different currency than our cruise brands' functional
currency will be affected by foreign currency exchange rate
fluctuations. These foreign currency exchange rate fluctuations may affect
our decision to order new cruise ships.
Interest Rate Risks
We manage our exposure to fluctuations in interest rates through our debt
portfolio management and investment strategies. We evaluate our debt
portfolio to determine whether to make periodic adjustments to the mix of
fixed and floating rate debt through the use of interest rate swaps and the
issuance of new debt.
Concentrations of Credit Risk
As part of our ongoing control procedures, we monitor concentrations of credit
risk associated with financial and other institutions with which we conduct
significant business. We seek to manage these credit risk exposures,
including counterparty nonperformance primarily associated with our cash and
cash equivalents, investments, notes receivables, reserve funds related to
customer deposits, future financing facilities, contingent obligations,
derivative instruments, insurance contracts and new ship progress payment
guarantees, by:
• Conducting business with well-established financial
institutions, insurance companies and export credit agencies
• Diversifying our counterparties
• Having guidelines regarding credit ratings and investment
maturities that we follow to help safeguard liquidity and minimize risk
• Generally requiring collateral and/or guarantees to support
notes receivable on significant asset sales and new ship progress payments to
shipyards
We also monitor the creditworthiness of travel agencies and tour operators in
Australia and Europe and credit and debit card providers to which we extend
credit in the normal course of our business. Our credit exposure also
includes contingent obligations related to cash payments received directly by
travel agents and tour operators for cash collected by them on cruise sales in
Australia and most of Europe where we are obligated to honor our guests'
cruise payments made by them to their travel agents and tour operators
regardless of whether we have received these payments.
Concentrations of credit risk associated with trade receivables and other
receivables, charter-hire agreements and contingent obligations are not
considered to be material, principally due to the large number of unrelated
accounts, the nature of these contingent obligations and their short
maturities. Normally, we have not required collateral or other security to
support normal credit sales and have not experienced significant credit
losses.
NOTE 6 - Segment Information
The chief operating decision maker, who is the President, Chief Executive
Officer and Chief Climate Officer of Carnival Corporation and Carnival plc
assesses performance and makes decisions to allocate resources for Carnival
Corporation & plc based upon review of the results across all of our
segments. The operating segments within each of our reportable segments have
been aggregated based on the similarity of their economic and other
characteristics, including geographic guest sourcing. Our four reportable
segments are comprised of (1) NAA cruise operations, (2) Europe cruise
operations ("Europe"), (3) Cruise Support and (4) Tour and Other.
Our Cruise Support segment includes our portfolio of leading port destinations
and exclusive islands as well as other services, all of which are operated for
the benefit of our cruise brands. Our Tour and Other segment represents the
hotel and transportation operations of Holland America Princess Alaska Tours
and other operations.
Three Months Ended May 31,
(in millions) Revenues Operating costs and Selling Depreciation Operating
expenses and and income (loss)
administrative amortization
2024
NAA $3,984 $2,580 $464 $414 $525
Europe 1,697 1,135 230 164 168
Cruise Support 63 39 90 49 (114)
Tour and Other 37 44 6 6 (19)
$5,781 $3,798 $789 $634 $560
2023
NAA $3,355 $2,282 $435 $374 $265
Europe 1,465 1,101 222 169 (27)
Cruise Support 55 29 71 48 (93)
Tour and Other 35 45 8 7 (25)
$4,911 $3,457 $736 $597 $120
Six Months Ended May 31,
(in millions) Revenues Operating costs and Selling Depreciation Operating
expenses and and income (loss)
administrative amortization
2024
NAA $7,558 $4,982 $966 $813 $797
Europe 3,466 2,386 464 328 288
Cruise Support 122 75 162 94 (210)
Tour and Other 41 59 10 12 (40)
$11,187 $7,502 $1,603 $1,247 $836
2023
NAA $6,434 $4,471 $875 $738 $351
Europe 2,759 2,179 436 338 (193)
Cruise Support 106 55 124 90 (162)
Tour and Other 44 64 14 13 (47)
$9,343 $6,768 $1,448 $1,179 $(52)
Revenue by geographic areas, which are based on where our guests are sourced,
were as follows:
Three Months Ended Six Months Ended
May 31, May 31,
(in millions) 2024 2023 2024 2023
North America $3,542 $2,988 $6,663 $5,684
Europe 1,631 1,446 3,199 2,633
Australia 355 307 781 645
Other 252 169 545 380
$5,781 $4,911 $11,187 $9,343
NOTE 7 - Earnings Per Share
Three Months Ended Six Months Ended
May 31, May 31,
(in millions, except per share data) 2024 2023 2024 2023
Net income (loss) for basic and diluted earnings per share $92 $(407) $(123) $(1,100)
Weighted-average shares outstanding 1,267 1,263 1,265 1,261
Dilutive effect of equity awards 4 - - -
Diluted weighted-average shares outstanding 1,271 1,263 1,265 1,261
Basic earnings per share $0.07 $(0.32) $(0.10) $(0.87)
Diluted earnings per share $0.07 $(0.32) $(0.10) $(0.87)
Antidilutive shares excluded from diluted earnings per share computations were
as follows:
Three Months Ended Six Months Ended
May 31, May 31,
(in millions) 2024 2023 2024 2023
Equity awards - 1 5 1
Convertible Notes 127 130 127 134
Total antidilutive securities 127 131 132 134
NOTE 8 - Supplemental Cash Flow Information
(in millions) May 31, 2024 November 30, 2023
Cash and cash equivalents (Consolidated Balance Sheets) $1,646 $2,415
Restricted cash (included in prepaid expenses and other and other assets) 23 21
Total cash, cash equivalents and restricted cash (Consolidated Statements $1,669 $2,436
of Cash Flows)
NOTE 9 - Subsequent Events
In June 2024, we announced that we will fold the operations of P&O Cruises
Australia into Carnival Cruise Line in March 2025. We do not anticipate this
realignment to have a material impact on our consolidated financial
statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Cautionary Note Concerning Factors That May Affect Future Results
Some of the statements, estimates or projections contained in this Quarterly
Report on Form 10-Q are "forward-looking statements" that involve risks,
uncertainties and assumptions with respect to us, including some statements
concerning future results, operations, outlooks, plans, goals, reputation,
cash flows, liquidity and other events which have not yet occurred. These
statements are intended to qualify for the safe harbors from liability
provided by Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts are statements that could be deemed
forward-looking. These statements are based on current expectations,
estimates, forecasts and projections about our business and the industry in
which we operate and the beliefs and assumptions of our management. We have
tried, whenever possible, to identify these statements by using words like
"will," "may," "could," "should," "would," "believe," "depends," "expect,"
"goal," "aspiration," "anticipate," "forecast," "project," "future," "intend,"
"plan," "estimate," "target," "indicate," "outlook," and similar expressions
of future intent or the negative of such terms.
Because forward-looking statements involve risks and uncertainties, there are
many factors that could cause our actual results, performance or achievements
to differ materially from those expressed or implied by our forward-looking
statements. This note contains important cautionary statements of the known
factors that we consider could materially affect the accuracy of our
forward-looking statements and adversely affect our business, results of
operations and financial position. These factors include, but are not limited
to, the following:
• Events and conditions around the world, including geopolitical
uncertainty, war and other military actions, inflation, higher fuel prices,
higher interest rates and other general concerns impacting the ability or
desire of people to travel have led, and may in the future lead, to a decline
in demand for cruises as well as negative impacts to our operating costs and
profitability.
• Pandemics have in the past and may in the future have a
significant negative impact on our financial condition and operations.
• Incidents concerning our ships, guests or the cruise industry
have in the past and may, in the future, negatively impact the satisfaction of
our guests and crew and lead to reputational damage.
• Changes in and non-compliance with laws and regulations under
which we operate, such as those relating to health, environment, safety and
security, data privacy and protection, anti-money laundering, anti-corruption,
economic sanctions, trade protection, labor and employment, and tax may be
costly and have in the past and may, in the future, lead to litigation,
enforcement actions, fines, penalties and reputational damage.
• Factors associated with climate change, including evolving and
increasing regulations, increasing global concern about climate change and the
shift in climate conscious consumerism and stakeholder scrutiny, and
increasing frequency and/or severity of adverse weather conditions could
adversely affect our business.
• Inability to meet or achieve our targets, goals, aspirations,
initiatives, and our public statements and disclosures regarding them,
including those that are related to sustainability matters, may expose us to
risks that may adversely impact our business.
• Breaches in data security and lapses in data privacy as well as
disruptions and other damages to our principal offices, information technology
operations and system networks and failure to keep pace with developments in
technology may adversely impact our business operations, the satisfaction of
our guests and crew and may lead to reputational damage.
• The loss of key team members, our inability to recruit or retain
qualified shoreside and shipboard team members and increased labor costs could
have an adverse effect on our business and results of operations.
• Increases in fuel prices, changes in the types of fuel consumed
and availability of fuel supply may adversely impact our scheduled itineraries
and costs.
• We rely on supply chain vendors who are integral to the
operations of our businesses. These vendors and service providers may be
unable to deliver on their commitments, which could negatively impact our
business.
• Fluctuations in foreign currency exchange rates may adversely
impact our financial results.
• Overcapacity and competition in the cruise and land-based
vacation industry may negatively impact our cruise sales, pricing and
destination options.
• Inability to implement our shipbuilding programs and ship
repairs, maintenance and refurbishments may adversely impact our business
operations and the satisfaction of our guests.
• We require a significant amount of cash to service our debt and
sustain our operations. Our ability to generate cash depends on many factors,
including those beyond our control, and we may not be able to generate cash
required to service our debt and sustain our operations.
• Our substantial debt could adversely affect our financial health
and operating flexibility.
The ordering of the risk factors set forth above is not intended to reflect
our indication of priority or likelihood. Additionally, many of these risks
and uncertainties are currently, and in the future may continue to be,
amplified by our substantial debt balance incurred during the pause of our
guest cruise operations. There may be additional risks that we consider
immaterial or which are unknown.
Forward-looking statements should not be relied upon as a prediction of actual
results. Subject to any continuing obligations under applicable law or any
relevant stock exchange rules, we expressly disclaim any obligation to
disseminate, after the date of this document, any updates or revisions to any
such forward-looking statements to reflect any change in expectations or
events, conditions or circumstances on which any such statements are based.
Forward-looking and other statements in this document may also address our
sustainability progress, plans, and goals (including climate change and
environmental-related matters). In addition, historical, current, and
forward-looking sustainability- and climate-related statements may be based on
standards and tools for measuring progress that are still developing, internal
controls and processes that continue to evolve, and assumptions and
predictions that are subject to change in the future and may not be generally
shared.
New Accounting Pronouncements
Refer to Note 1 - "General, Accounting Pronouncements" of the consolidated
financial statements for additional discussion regarding Accounting
Pronouncements.
Critical Accounting Estimates
For a discussion of our critical accounting estimates, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
is included in the Form 10-K.
Seasonality
Our passenger ticket revenues are seasonal. Demand for cruises has been
greatest during our third quarter, which includes the Northern Hemisphere
summer months. This higher demand during the third quarter results in higher
ticket prices and occupancy levels and, accordingly, the largest share of our
operating income is typically earned during this period. Our results are also
impacted by ships being taken out-of-service for planned maintenance, which we
schedule during non-peak seasons. In addition, substantially all of Holland
America Princess Alaska Tours' revenue and operating income is generated from
May through September in conjunction with Alaska's cruise season.
Known Trends and Uncertainties
• We believe the volatility in the price of fuel and foreign
currency exchange rates are reasonably likely to impact our profitability.
• We believe a global minimum tax could affect us in 2026, with
the potential for a one-year deferral. Prior to any mitigating actions, we
believe the annual impact could be approximately $200 million. We continue to
evaluate the impact of these rules and are currently evaluating a variety of
mitigating actions to minimize the impact. The application of the rules
continues to evolve, and its outcome may alter our tax obligations in certain
countries in which we operate.
• We believe the increasing global focus on climate change,
including the reduction of greenhouse gas emissions and new and evolving
regulatory requirements, is reasonably likely to have a material negative
impact on our future financial results. We became subject to the EU ETS on
January 1, 2024, which includes a three-year phase-in period. The impact in
2024 will be approximately $50 million.
Statistical Information
Three Months Ended Six Months Ended
May 31,
May 31,
2024 2023 2024 2023
Passenger Cruise Days ("PCDs") (in millions) (a) 24.3 21.8 47.8 42.0
Available Lower Berth Days ("ALBDs") (in millions) (b) (c) 23.5 22.3 46.5 44.3
Occupancy percentage (d) 104% 98% 103% 95%
Passengers carried (in millions) 3.3 3.0 6.3 5.7
Fuel consumption in metric tons (in millions) 0.7 0.7 1.5 1.5
Fuel consumption in metric tons per thousand ALBDs 31.9 32.5 31.8 33.0
Fuel cost per metric ton consumed (excluding European Union Allowance) $684 $677 $685 $704
Currencies (USD to 1)
AUD $0.66 $0.67 $0.66 $0.68
CAD $0.73 $0.74 $0.74 $0.74
EUR $1.08 $1.08 $1.08 $1.08
GBP $1.26 $1.23 $1.26 $1.23
Notes to Statistical Information
(a) PCD represents the number of cruise passengers on a voyage multiplied
by the number of revenue-producing ship operating days for that voyage.
(b) ALBD is a standard measure of passenger capacity for the period that
we use to approximate rate and capacity variances, based on consistently
applied formulas that we use to perform analyses to determine the main
non-capacity driven factors that cause our cruise revenues and expenses to
vary. ALBDs assume that each cabin we offer for sale accommodates two
passengers and is computed by multiplying passenger capacity by
revenue-producing ship operating days in the period.
(c) For the three months ended May 31, 2024 compared to the three months
ended May 31, 2023, we had a 5.4% capacity increase in ALBDs comprised of a
11% capacity increase in our NAA segment and a 3.6% capacity decrease in our
Europe segment.
Our NAA segment's capacity increase was caused by the following:
• Carnival Cruise Line 4,090-passenger capacity ship that was
transferred from Costa Cruises and entered into service in May 2023
• Seabourn 260-passenger capacity ship that entered into service
in July 2023
• Carnival Cruise Line 5,360-passenger capacity ship that entered
into service in December 2023
• Princess Cruises 4,310-passenger capacity ship that entered into
service in February 2024
• Carnival Cruise Line 4,130-passenger capacity ship that was
transferred from Costa Cruises and entered into service in April 2024
Our Europe segment's capacity decrease was caused by the following:
• Costa Cruises 4,090-passenger capacity ship that was transferred
to Carnival Cruise Line in March 2023
• AIDA Cruises 1,270-passenger capacity ship removed from service
in November 2023
• Costa Cruises 4,240-passenger capacity ship that was transferred
to Carnival Cruise Line in February 2024
• The Red Sea rerouting as certain ships repositioned without
guests
The decrease in our Europe segment's capacity was partially offset by the
following:
• The return to service of two ships as part of the completion of
our return to guest cruise operations
• Cunard 2,960-passenger capacity ship that entered into service
in May 2024
For the six months ended May 31, 2024 compared to the six months ended May 31,
2023, we had a 4.8% capacity increase in ALBDs comprised of a 7.1% capacity
increase in our NAA segment and a 1.2% capacity increase in our Europe
segment.
Our NAA segment's capacity increase was caused by the following:
• Carnival Cruise Line 4,090-passenger capacity ship that was
transferred from Costa Cruises and entered into service in May 2023
• Seabourn 260-passenger capacity ship that entered into service
in July 2023
• Carnival Cruise Line 5,360-passenger capacity ship that entered
into service in December 2023
• Princess Cruises 4,310-passenger capacity ship that entered into
service in February 2024
• Carnival Cruise Line 4,130-passenger capacity ship that was
transferred from Costa Cruises and entered into service in April 2024
Our Europe segment's capacity increase was caused by the following:
• The return to service of two ships as part of the completion of
our return to guest cruise operations
• P&O Cruises (UK) 5,280-passenger capacity ship that entered
into service in December 2022
• Cunard 2,960-passenger capacity ship that entered into service
in May 2024
The increase in our Europe segment's capacity was partially offset by the
following:
• Costa Cruises 4,090-passenger capacity ship that was transferred
to Carnival Cruise Line in March 2023
• AIDA Cruises 1,270-passenger capacity ship removed from service
in November 2023
• Costa Cruises 4,240-passenger capacity ship that was transferred
to Carnival Cruise Line in February 2024
• The Red Sea rerouting as certain ships repositioned without
guests
(d) Occupancy, in accordance with cruise industry practice, is calculated
using a numerator of PCDs and a denominator of ALBDs, which assumes two
passengers per cabin even though some cabins can accommodate three or more
passengers. Percentages in excess of 100% indicate that on average more than
two passengers occupied some cabins.
Three Months Ended May 31, 2024 ("2024") Compared to Three Months Ended May
31, 2023 ("2023")
Revenues
Consolidated
Passenger ticket revenues made up 65% of our 2024 total revenues. Passenger
ticket revenues increased by $613 million, or 20%, to $3.8 billion in 2024
from $3.1 billion in 2023.
This increase was caused by:
• $253 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
• $185 million - 5.4% capacity increase in ALBDs
• $176 million - 5.6 percentage point increase in occupancy
The remaining 35% of 2024 total revenues was comprised of onboard and other
revenues, which increased by $257 million, or 15%, to $2.0 billion in 2024
from $1.8 billion in 2023.
This increase was driven by:
• $132 million - 5.4% capacity increase in ALBDs
• $70 million - 5.6 percentage point increase in occupancy
• $47 million - higher onboard spending by our guests
NAA Segment
Passenger ticket revenues made up 62% of our NAA segment's 2024 total
revenues. Passenger ticket revenues increased by $429 million, or 21%, to
$2.5 billion in 2024 from $2.0 billion in 2023.
This increase was driven by:
• $225 million - 11% capacity increase in ALBDs
• $157 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
• $44 million - 2.2 percentage point increase in occupancy
The remaining 38% of our NAA segment's 2024 total revenues were comprised of
onboard and other revenues, which increased by $200 million, or 15%, to $1.5
billion in 2024 compared to $1.3 billion in 2023.
This increase was caused by:
• $145 million - 11% capacity increase in ALBDs
• $37 million - higher onboard spending by our guests
• $28 million - 2.2 percentage point increase in occupancy
Europe Segment
Passenger ticket revenues made up 77% of our Europe segment's 2024 total
revenues. Passenger ticket revenues increased by $190 million, or 17%, to
$1.3 billion in 2024 compared to $1.1 billion in 2023.
This increase was driven by:
• $133 million - 11 percentage point increase in occupancy
• $96 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
These increases were partially offset by a 3.6% capacity decrease in ALBDs,
representing $40 million.
The remaining 23% of our Europe segment's 2024 total revenues were comprised
of onboard and other revenues, which increased by $42 million, or 12%, to $395
million in 2024 from $353 million in 2023. This increase was caused by an 11
percentage point increase in occupancy.
Costs and Expenses
Consolidated
Operating costs and expenses increased by $340 million, or 10%, to
$3.8 billion in 2024 from $3.5 billion in 2023.
This increase was caused by:
• $212 million - 5.4% capacity increase in ALBDs
• $82 million - higher commissions, transportation costs, and
other expenses driven by higher commission on increased ticket pricing and an
increase in the number of guests
• $41 million - nonrecurrence of a gain on sale of one NAA segment
ship in 2023
• $37 million - 5.6 percentage point increase in occupancy
• $30 million - higher onboard and other cost of sales driven by
higher onboard revenues
These increases were partially offset by:
• $32 million - lower repair and maintenance expenses (including
dry-dock expenses)
• $30 million - decrease in various other costs
NAA Segment
Operating costs and expenses increased by $299 million, or 13%, to $2.6
billion in 2024 from $2.3 billion in 2023.
This increase was driven by:
• $251 million - 11% capacity increase in ALBDs
• $52 million - higher commissions, transportation costs, and
other expenses driven by higher commission on increased ticket pricing and an
increase in the number of guests
• $41 million - nonrecurrence of a gain on sale of one NAA segment
ship in 2023
These increases were partially offset by:
• $24 million - lower repair and maintenance expenses (including
dry-dock expenses)
• $21 million - decrease in various other costs
Europe Segment
Operating costs and expenses were $1.1 billion in 2024 and 2023. The changes
in operating costs and expenses for the Europe segment were not material.
Operating Income (Loss)
Our consolidated operating income (loss) increased by $440 million to $560
million in 2024 from $120 million in 2023. Our NAA segment's operating income
(loss) increased by $260 million to $525 million in 2024 from $265 million in
2023, and our Europe segment's operating income (loss) increased by $195
million to $168 million in 2024 from $(27) million in 2023. These changes were
primarily due to the reasons discussed above.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, decreased by $93 million, or
17%, to $450 million in 2024 from $542 million in 2023. The decrease was
substantially all due to a decrease in total debt and lower interest rates.
Six Months Ended May 31, 2024 ("2024") Compared to Six Months Ended May 31,
2023 ("2023")
Revenues
Consolidated
Passenger ticket revenues made up 66% of our 2024 total revenues. Passenger
ticket revenues increased by $1.4 billion, or 23%, to $7.4 billion in 2024
from $6.0 billion in 2023.
This increase was caused by:
• $525 million - 8.2 percentage point increase in occupancy
• $502 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
• $302 million - 4.8% capacity increase in ALBDs
• $35 million - net favorable foreign currency translational
impact
The remaining 34% of 2024 total revenues was comprised of onboard and other
revenues, which increased by $484 million, or 15%, to $3.8 billion in 2024
from $3.3 billion in 2023.
This increase was driven by:
• $218 million - 8.2 percentage point increase in occupancy
• $184 million - 4.8% capacity increase in ALBDs
• $67 million - higher onboard spending by our guests
NAA Segment
Passenger ticket revenues made up 63% of our NAA segment's 2024 total
revenues. Passenger ticket revenues increased by $804 million, or 20%, to
$4.7 billion in 2024 from $3.9 billion in 2023.
This increase was caused by:
• $378 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
• $277 million - 7.1% capacity increase in ALBDs
• $168 million - 4.3 percentage point increase in occupancy
The remaining 37% of our NAA segment's 2024 total revenues were comprised of
onboard and other revenues, which increased by $320 million, or 13%, to $2.8
billion in 2024 compared to $2.5 billion in 2023.
This increase was caused by:
• $176 million - 7.1% capacity increase in ALBDs
• $107 million - 4.3 percentage point increase in occupancy
• $50 million - higher onboard spending by our guests
Europe Segment
Passenger ticket revenues made up 77% of our Europe segment's 2024 total
revenues. Passenger ticket revenues increased by $563 million, or 27%, to
$2.7 billion in 2024 compared to $2.1 billion in 2023.
This increase was driven by:
• $357 million - 14 percentage point increase in occupancy
• $123 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
• $39 million - net favorable foreign currency translational
impact
• $24 million - 1.2% capacity increase in ALBDs
The remaining 23% of our Europe segment's 2024 total revenues were comprised
of onboard and other revenues, which increased by $144 million, or 22%, to
$799 million in 2024 from $655 million in 2023.
This increase was driven by:
• $111 million - 14 percentage point increase in occupancy
• $17 million - higher onboard spending by our guests
Costs and Expenses
Consolidated
Operating costs and expenses increased by $735 million, or 11%, to
$7.5 billion in 2024 from $6.8 billion in 2023.
This increase was caused by:
• $340 million - 4.8% capacity increase in ALBDs
• $212 million - higher commissions, transportation costs, and
other expenses driven by higher commission on increased ticket pricing and an
increase in the number of guests
• $109 million - 8.2 percentage point increase in occupancy
• $75 million - higher onboard and other cost of sales driven by
higher onboard revenues
• $41 million - nonrecurrence of a gain on sale of one NAA segment
ship in 2023
• $29 million - net unfavorable foreign currency translational
impact
These increases were partially offset by $47 million of lower fuel price and
consumption.
Selling and administrative expenses increased by $154 million, or 11%, to
$1.6 billion in 2024 from $1.4 billion in 2023. This increase was caused by
an increase in advertising costs and administrative expenses, which includes
an increase in compensation costs.
NAA Segment
Operating costs and expenses increased by $512 million, or 11%, to $5.0
billion in 2024 from $4.5 billion in 2023.
This increase was caused by:
• $315 million - 7.1% capacity increase in ALBDs
• $100 million - higher commissions, transportation costs, and
other expenses driven by higher commission on increased ticket pricing and an
increase in the number of guests
• $42 million - higher onboard and other cost of sales driven by
higher onboard revenues
• $41 million - nonrecurrence of a gain on sale of one NAA segment
ship in 2023
• $35 million - 4.3 percentage point increase in occupancy
• $22 million - higher repair and maintenance expenses (including
dry-dock expenses)
These increases were partially offset by $38 million of lower fuel price and
consumption.
Selling and administrative expenses increased by $91 million, or 10%, to $966
million in 2024 from $875 million in 2023. This increase was caused by an
increase in advertising costs and administrative expenses, which includes an
increase in compensation costs.
Europe Segment
Operating costs and expenses increased by $207 million, or 10%, to $2.4
billion in 2024 from $2.2 billion in 2023.
This increase was caused by:
• $113 million - higher commissions, transportation costs, and
other expenses driven by an increase in the number of guests
• $73 million - 14 percentage point increase in occupancy
• $33 million - net unfavorable foreign currency translational
impact
• $32 million - higher onboard and other cost of sales driven by
higher onboard revenues
• $25 million - 1.2% capacity increase in ALBDs
These increases were partially offset by:
• $29 million - lower various other costs
• $23 million - lower repair and maintenance expenses (including
dry-dock expenses).
Operating Income (Loss)
Our consolidated operating income (loss) increased by $887 million to $836
million in 2024 from $(52) million in 2023. Our NAA segment's operating income
(loss) increased by $446 million to $797 million in 2024 from $351 million in
2023, and our Europe segment's operating income (loss) increased by $481
million to $288 million in 2024 from $(193) million in 2023. These changes
were primarily due to the reasons discussed above.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, decreased by $161 million, or
15%, to $0.9 billion in 2024 from $1.1 billion in 2023. The decrease was
substantially all due to a decrease in total debt.
Debt extinguishment and modification costs increased by $35 million, or 112%,
to $66 million in 2024 from $31 million in 2023 as a result of debt
transactions occurring during the respective periods.
Liquidity, Financial Condition and Capital Resources
As of May 31, 2024, we had $4.6 billion of liquidity including $1.6 billion
of cash and cash equivalents and $3.0 billion of borrowings available under
our Revolving Facility, which matures in August 2024, at which point it will
be replaced by the $2.5 billion New Revolving Facility available through
August 2027. We will continue to pursue various opportunities to repay
portions of our existing indebtedness and refinance future debt maturities to
extend maturity dates and reduce interest expense. Refer to Note 3 - "Debt" of
the consolidated financial statements and Funding Sources below for additional
details.
We had a working capital deficit of $9.6 billion as of May 31, 2024 compared
to a working capital deficit of $6.2 billion as of November 30, 2023. The
increase in working capital deficit was substantially all due to an increase
in customer deposits, a decrease in cash and cash equivalents and a decrease
in prepaid expenses and other. We operate with a substantial working capital
deficit. This deficit is mainly attributable to the fact that, under our
business model, substantially all of our passenger ticket receipts are
collected in advance of the applicable sailing date. These advance passenger
receipts generally remain a current liability on our balance sheet until the
sailing date. The cash generated from these advance receipts is used
interchangeably with cash on hand from other sources, such as our borrowings
and other cash from operations. The cash received as advanced receipts can be
used to fund operating expenses, pay down our debt, make long-term investments
or any other use of cash. Included within our working capital are $7.9 billion
and $6.1 billion of customer deposits as of May 31, 2024 and November 30,
2023, respectively. We have agreements with a number of credit card processors
that transact customer deposits related to our cruise vacations. Certain of
these agreements allow the credit card processors to request, under certain
circumstances, that we provide a capped reserve fund in cash. In addition, we
have a relatively low level of accounts receivable and limited investment in
inventories.
Sources and Uses of Cash
Operating Activities
Our business provided $3.8 billion of net cash flows from operating activities
during the six months ended May 31, 2024, an increase of $2.3 billion,
compared to $1.5 billion provided for the same period in 2023. This was
caused by an increase in cash provided by the release of substantially all
credit card reserves (included in the change in prepaid expenses and other
assets), a decrease in the net loss compared to the same period in 2023 and
other working capital changes.
Investing Activities
During the six months ended May 31, 2024, net cash used in investing
activities was $3.4 billion. This was caused by capital expenditures of
$3.5 billion primarily attributable to the delivery of a 5,360 and a
4,310-passenger capacity NAA segment ships and one 2,960-passenger capacity
Europe segment ship.
During the six months ended May 31, 2023, net cash used in investing
activities was $1.5 billion. This was driven by:
• Capital expenditures of $1.8 billion primarily attributable to
the delivery of one 5,280-passenger capacity Europe segment ship
• Proceeds from sales of one 2,700-passenger capacity Europe
segment ship, one 1,270-passenger capacity Europe segment ship and one
460-passenger capacity NAA segment ship totaling $255 million
Financing Activities
During the six months ended May 31, 2024, net cash used in financing
activities of $1.2 billion was caused by:
• Repayments of $4.1 billion of long-term debt
• Debt issuance costs of $117 million
• Debt extinguishment costs of $41 million
• Issuances of $3.0 billion of long-term debt
During the six months ended May 31, 2023, net cash used in financing
activities of $1.6 billion was driven by:
• Repayments of $0.2 billion of short-term borrowings
• Repayments of $2.3 billion of long-term debt
• Issuances of $1.0 billion of long-term debt
• Payments of $94 million related to debt issuance costs
• Purchases of $20 million of Carnival plc ordinary shares and
issuances of $22 million of Carnival Corporation common stock under our Stock
Swap Program
Funding Sources
As of May 31, 2024, we had $4.6 billion of liquidity including $1.6 billion
of cash and cash equivalents and $3.0 billion of borrowings available under
our Revolving Facility, which matures in August 2024, at which point it will
be replaced by the New Revolving Facility available through August 2027. Refer
to Note 3 - "Debt" of the consolidated financial statements for additional
discussion. In addition, we had $2.2 billion of undrawn export credit
facilities to fund ship deliveries planned through 2027. We plan to use
existing liquidity and future cash flows from operations to fund our cash
requirements including capital expenditures not funded by our export credit
facilities. We seek to manage our credit risk exposures, including
counterparty nonperformance associated with our cash and cash equivalents, and
future financing facilities by conducting business with well-established
financial institutions, and export credit agencies and diversifying our
counterparties.
(in billions) 2024 2025 2026 2027
Future export credit facilities at May 31, 2024 $- $0.7 $- $1.4
Our export credit facilities contain various financial covenants as described
in Note 3 - "Debt". At May 31, 2024, we were in compliance with the
applicable covenants under our debt agreements.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements, including guarantee
contracts, retained or contingent interests, certain derivative instruments
and variable interest entities that either have, or are reasonably likely to
have, a current or future material effect on our consolidated financial
statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
For a discussion of our hedging strategies and market risks, see the
discussion below and Note 10 - "Fair Value Measurements, Derivative
Instruments and Hedging Activities and Financial Risks" in our consolidated
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations within our Form 10-K. There have been no
material changes to our exposure to market risks since the date of our 2023
Form 10-K.
Interest Rate Risks
The composition of our debt, interest rate swaps and cross currency swaps, was
as follows:
May 31, 2024
Fixed rate 61%
EUR fixed rate 23%
Floating rate 4%
EUR floating rate 11%
Item 4. Controls and Procedures.
A. Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable
assurance that information required to be disclosed by us in the reports that
we file or submit under the Securities Exchange Act of 1934, is recorded,
processed, summarized and reported, within the time periods specified in the
U.S. Securities and Exchange Commission's rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us in our
reports that we file or submit under the Securities Exchange Act of 1934 is
accumulated and communicated to our management, including our principal
executive and principal financial officers, or persons performing similar
functions, as appropriate, to allow timely decisions regarding required
disclosure.
Our President, Chief Executive Officer and Chief Climate Officer and our Chief
Financial Officer and Chief Accounting Officer have evaluated our disclosure
controls and procedures and have concluded, as of May 31, 2024, that they are
effective to provide a reasonable level of assurance, as described above.
B. Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting
during the quarter ended May 31, 2024 that have materially affected or are
reasonably likely to materially affect our internal control over financial
reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The legal proceedings described in Note 4 - "Contingencies and Commitments" of
our consolidated financial statements, including those described under
"Regulatory or Governmental Inquiries and Investigations," are incorporated in
this "Legal Proceedings" section by reference. Additionally, SEC rules require
disclosure of certain environmental matters when a governmental authority is a
party to the proceedings and such proceedings involve potential monetary
sanctions that we believe may exceed $1 million for such proceedings.
On June 20, 2022, Princess Cruises notified the Australian Maritime Safety
Authorization ("AMSA") and the flag state, Bermuda, regarding approximately
six cubic meters of comminuted food waste (liquid biodigester effluent)
inadvertently released by Coral Princess inside the Great Barrier Reef Marine
Park. On June 23, 2022, the UK P&I Club N.V. provided a letter of
undertaking for approximately $1.9 million (being the estimated maximum
combined penalty). On May 31, 2023, we received a summons from the Australia
Federal Prosecution Service indicating that formal charges are being pursued
against Princess Cruises and the Captain of the vessel. We believe the
ultimate outcome will not have a material impact on our consolidated financial
statements.
On February 5, 2024, P&O Cruises (Australia) notified AMSA and the UK
Marine Accident Investigation Branch that a small amount of oil may have
inadvertently contaminated grey water which was discharged by Pacific
Adventure in the Great Barrier Reef Marine Park, Queensland. We are conducting
an internal investigation and intend to cooperate with any inquiries from
governmental authorities. We believe the ultimate outcome will not have a
material impact on our consolidated financial statements.
Item 1A. Risk Factors.
The risk factors that affect our business and financial results are discussed
in "Item 1A. Risk Factors," included in the Form 10-K, and there has been no
material change to these risk factors since the Form 10-K filing. These risks
should be carefully considered, and could materially and adversely affect our
results, operations, outlooks, plans, goals, growth, reputation, cash flows,
liquidity, and stock price. Our business also could be affected by risks that
we are not presently aware of or that we currently consider immaterial to our
operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
A. Stock Swap Program
Our Stock Swap Program allows us to realize a net cash benefit when Carnival
Corporation common stock is trading at a premium to the price of Carnival plc
ordinary shares. Under the Stock Swap Program, we may elect to offer and sell
shares of Carnival Corporation common stock at prevailing market prices in
ordinary brokers' transactions and repurchase an equivalent number of Carnival
plc ordinary shares in the UK market.
Under the Stock Swap Program effective June 2021, the Boards of Directors
authorized the sale of up to $500 million of shares of Carnival Corporation
common stock in the U.S. market and the repurchase of an equivalent number of
Carnival plc ordinary shares.
We may in the future implement a program to allow us to realize a net cash
benefit when Carnival plc ordinary shares are trading at a premium to the
price of Carnival Corporation common stock.
Any sales of Carnival Corporation common stock and Carnival plc ordinary
shares have been or will be registered under the Securities Act of 1933, as
amended. Since the beginning of the Stock Swap Program, first authorized in
June 2021, we have sold 17.2 million shares of Carnival Corporation common
stock and repurchased the same amount of Carnival plc ordinary shares,
resulting in net proceeds of $29 million. During the three months ended May
31, 2024, there were no sales or repurchases under the Stock Swap Program.
During the three months ended May 31, 2024, no shares of Carnival Corporation
common stock or Carnival plc ordinary shares were repurchased.
Item 5. Other Information.
C. Trading Plans
During the quarter ended May 31, 2024, no director or Section 16 officer
adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1
trading arrangements (in each case, as defined in Item 408(a) of Regulation
S-K).
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